Why Singapore's 'explosive expansion' in 2Q could be short-lived

Is it too early to pop the champagne?

According to UBS, Singapore’s small economy has recorded volatile growth in recent years and the explosive expansion in Q2 appears to be another example of that. Real GDP rose 15.2% annualised in Q2 from Q1. On the year the economy expanded 3.7%.

However, UBS noted that there remains a question mark over sustainability. Accelerations in late 2011 and 2012 in Singapore non-biomedical manufacturing have proved short lived and the national performance amongst ASEAN peers is not uniformly strong.

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The unusual strength in GDP was mainly driven by the manufacturing sector (up 37.6% annualised qoq), although both construction and services were also robust (both up 9% annualised qoq).

The gains in manufacturing were not just in the volatile bio-medical sector but also in electronics. Even so there remains a question mark over sustainability. Accelerations in late 2011 and 2012 in Singapore non-biomedical manufacturing have proved short lived and the national performance amongst ASEAN peers is not uniformly strong. 

Thai manufacturing weakness in the context of Indonesian and Philippine strength suggests domestic drivers rather than a trade led recovery. Moreover, the message on global trade growth – so important for Singapore – remains downbeat.