BUILDING & ENGINEERING | Staff Reporter, Singapore

Construction sector to weigh down 2018 GDP growth

The GDP is expected to grow 3%, slower than last year's 3.5%.

Thinktank BMI Research forecasts Singapore's real GDP growth to grow at a slower pace of 3% in 2018 largely due to a construction sector that's still weak.

According to an analysis, the construction industry's outlook is also likely to remain weak, acting as a drag on the overall economy. However, government measures and rising house prices will lend some degree of support.

"The government's ongoing labour restructuring process and the still-weak property market continue to weigh on the construction sector and we expect the outlook to remain anaemic," the team said.

The industry is projected to grow by 2.4% in real terms in 2018, the same pace as in 2017, reflecting weak investor sentiment in the residential and non-residential building sectors.

With Singapore's property market only showing incipient signs of recovering, the construction industry is still unlikely to see a significant pick up over the coming quarters, with property price growth expanding by 0.7% QoQ in both 4Q2017 and 3Q2017.

To counter this, the government will utilise $1.4b to support the local construction industry, but the impact is likely to be limited as firms continue to struggle with slower demand and labour shortages.

Here's more from BMI Research:

Meanwhile, from the production approach, Singapore's growth in the fourth quarter in 2017 continued to be driven by the manufacturing sector, which expanded by 6.2% YoY. This was largely due to strong demand from the electronics and precision engineering clusters.

However, Singapore's sound economic fundamentals and positive business environment are likely to provide support for the city-state over the coming quarters.

The country has a strong external position, with a net international investment position of approximately 250% of GDP and a considerable current account surplus of approximately 20.0% of GDP in 2016.

In addition, Singapore's operational risk environment remains sound, coming in at 82.2 (out of 100) compared to the regional average of 53.6 and we expect ongoing efforts to strengthen the already positive business environment to ensure that the republic remains an attractive investment destination over the coming years.

This was reflected in Singapore's retention of its second place ranking in the World Bank's 2018 Ease of Doing Business report, boding well for the country's economic outlook. 

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