Singapore's economy expands more than estimated on services

A man jogs along the Marina Bay next to the financial business district office buildings in Singapore on October 14, 2016. (AFP Photo/Roslan Rahman)

Singapore’s economy grew at a faster pace than economists estimated in the fourth quarter of 2017, boosted by services such as finance and insurance.

Gross domestic product rose at a seasonally adjusted and annualized rate of 2.8 percent from the previous three months, according to preliminary figures from the trade ministry on Tuesday. The median estimate of eight economists in a Bloomberg survey was 1.6 percent. Growth was revised to 9.4 percent in the third quarter.

Singapore, among Asia’s most export-reliant economies, has benefited from a global trade recovery that’s boosted demand for its electronics goods. The government and the central bank forecast GDP growth of 1.5 to 3.5 percent this year.

Against the backdrop of steady growth and benign inflation, the government has signaled it may raise taxes while the Monetary Authority of Singapore opened the door to a tightening move at its last policy decision in October.

“We hope to see continued improvement in services growth momentum,” said Irvin Seah, an economist at DBS Group Holdings Ltd., Singapore’s biggest lender. He expects some moderation this year with growth coming in at 3 percent.

What Our Economists Say:

Singapore’s below-trend (year on year) expansion in 4Q provides scope for the Monetary Authority of Singapore to maintain a neutral currency stance in April. Still, the central bank could re-center the policy band higher, should SGDNEER continue to trade on the strong side.–Tamara Henderson, Bloomberg Economics

Compared to the same period last year, GDP rose 3.1 percent in the fourth quarter, stronger than the 2.6 percent median estimate of economists surveyed by Bloomberg. The economy expanded 3.5 percent in 2017, the fastest pace since 2014. Full-year growth was more than double the initial government forecast as the country benefited from the global economic upswing, Prime Minister Lee Hsien Loong said in his New Year message Sunday.

Other details from the GDP report:

Services industry, which accounts for about two-thirds of economy, grew 7.5 percent in the fourth quarter from the prior three months; growth in services also boosted by wholesale and retail, as well as transportation and storage sectors Manufacturing fell 11.5 percent; construction dropped 3.6 percent

“Manufacturing has been tapering off, and we’ll probably see this continue in the first half of this year,” said Selena Ling, head of treasury research and strategy at Oversea-Chinese Banking Corp. in Singapore. “Services is coming up a bit better, so the growth base is still broadening.” – Bloomberg

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