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Singapore's Q4 GDP growth surprises as manufacturing rebounds

By Masayuki Kitano and Fathin Ungku
Office workers walk to the train station during evening rush hour in the financial district of Singapore March 9, 2015. REUTERS/Edgar Su/Files

By Masayuki Kitano and Fathin Ungku

SINGAPORE (Reuters) - Singapore's economy posted surprisingly strong growth in the fourth quarter, although the outlook is clouded by China's slowdown and risks of rising global trade protectionism under the incoming Trump Administration.

A rebound in manufacturing helped the city-state dodge a recession, a welcome lift for an economy that has seen lacklustre growth in the past two years as exports fell away amid sluggish global demand. The services sector also turned around after three quarters of contraction.

"The key will be to see what happens in the first few months of this year," said Selena Ling, head of research and strategy for OCBC Bank.

"The assumption is that global demand should be stabilising but the biggest unknown, of course, is what happens after Trump takes office with all his anti-China, anti-trade type of rhetoric," Ling added.

Gross domestic product expanded a seasonally adjusted and annualised 9.1 percent in the October-December period from the previous three months, its fastest pace in three years, initial estimates from the Ministry of Trade and Industry (MTI) showed on Tuesday.

That came after GDP contracted a revised 1.9 percent in the third quarter. The median forecast in a Reuters poll was for growth of 3.7 percent.


The manufacturing sector grew an annualised 14.6 percent from the previous quarter compared with an 8.1 percent contraction in the third. From a year earlier, the sector expanded 6.5 percent - the strongest since the first quarter of 2014, when it grew 9.6 percent.

MTI said manufacturing growth was boosted by electronics and biomedical output. Service sector output jumped 9.4 percent, the first quarterly growth since the fourth quarter of 2015.

Trump has pledged to redraw trade deals to win back American jobs, and has vowed to pull the United States out of the Trans-Pacific Partnership, a free-trade pact aimed at linking a dozen Pacific Rim nations.

The Singapore dollar edged up although the tepid growth outlook for 2017 limited gains. It was up 0.3 percent at 1.4469 per U.S. dollar, having set a 7-year low of 1.4538 in late December. Economists estimated it remains comfortably below the mid-point of the range targeted by the central bank.

The market moves reflected caution over the upbeat figures. Capital Economics analysts estimated that over the past decade, the average revision between the advance and the final estimates of quarter-on-quarter growth had been 3.9 percentage points.

The economy grew 1.8 percent for the full year, exceeding the government's previous forecast of 1.0-1.5 percent growth, but still the slowest growth since 2009.

Edward Lee, economist at Standard Chartered Bank, sees growth slowing in 2017 compared with 2016.

In spite of the tepid growth outlook, most analysts expect the Monetary Authority of Singapore to keep its exchange-rate based policy unchanged at its next meeting in April, although some say it could ease.

"Right now we have an official call for MAS to ease policy in April. But if strength continues into the first quarter, the chance of that happening would be lower," said Michael Wan, an economist for Credit Suisse.

(Editing by Jacqueline Wong)