Growth in the manufacturing, wholesale trade, transportation and storage sectors will likely be subdued.
The Ministry of Trade and Industry (MTI) has downgraded Singapore’s GDP growth forecast to 1.5-2.5% from the earlier 1.5-3.5% range, highlighting the challenging economic outlook for the export-oriented city.
The move comes after a dismal start to the year that saw the Singapore economy grew by 1.2% YoY in Q1, which is slightly lower than the 1.3% growth in the previous quarter. In Q1, the manufacturing sector shrunk 0.5% YoY to reverse the 4.6% gain in the previous quarter amidst heavy output declines in precision engineering and electronics clusters. The wholesale and retail trade sector also contracted sharply by 1.8% in Q1 to extend the 0.8% decline in the previous quarter.
Similarly, growth in the accommodation and food services sector slowed to 1.8% from 3.5% previously. The growth in the finance and insurance sector as well as the business services sector slowed to 3.2% and 2.3%, respectively.
The construction sector reversed the 1.2% decline in Q4 to post growth of 2.9% in Q1 to mark the first quarter of YoY expansion after 10 straight quarters of contraction. The transportation & storage sector similarly grew 0.8% in Q1 to extend the 0.5% expansion in the previous quarter. The information and communications sector also picked up pace after expanding by 6.6% from the 5.5% expansion previously. The “other services industries” also picked up pace to 2.2% from 0.3% previously.
“Against this challenging external economic backdrop, key outward-oriented sectors in the Singapore economy are expected to slow this year. First, the manufacturing sector is likely to see a sharp slowdown in growth following two years of robust expansion,” the agency said in a statement, identifying the electronics and precision engineering clusters as the most vulnerable.
“[G]rowth in outward-oriented services sectors such as wholesale trade and transportation & storage is expected to ease in tandem with the moderation in growth in key advanced and regional economies,” MTI added.
However, the MTI remains bullish on the information and communications sector amidst heightened demand for IT and digital solutions. The education, health & social services segment is also likely to remain resilient amidst ongoing ramp-up of operations in healthcare facilities along with the construction sector which is expected to sustain its strong momentum.
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