Output will continue to shrink as woes mount.
There are darker days ahead for Singapore’s struggling manufacturers, after the sector posted a disheartening 6.7% contraction in the fourth quarter of 2015. Analysts warn that the manufacturing sector will remain stuck in recession this year, as restructuring woes and weak demand continue to dampen output growth.
According to BMI Research, demand dynamics will remain skewed against export-oriented countries like Singapore on back of weak global growth. Meanwhile, manufacturers will continue to grapple with rising costs as Singapore struggles to shift away from a high dependence on foreign workers.
As a result of weakening manufacturing output, BMI Research warned that manufacturing’s share of GDP growth will continue to shrink in coming quarters.
“While Singaporean policymakers have long preferred to maintain a significant manufacturing base (generally greater than 20.0% of GDP), the sector has fallen below this level since the global financial crisis owing to rapid shifts in the external and domestic economic environments,” BMI Research said.
“We see little reason for a reversal in this trend, and instead believe that the manufacturing sector will not only continue to act as a drag on growth over the near-term, but will also struggle to regain its former prominence in the Singaporean economy over the medium-term,” the report added.
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