Singapore Q3 GDP misses forecasts

Roslan Rahman | AFP | Getty Images

Singapore's economy grew at a slower-than-expected pace in the third quarter, an advanced estimate from the government showed on Tuesday, adding to concerns about whether the wealth city state can shake off the impact of sluggish global growth.

The economy expanded 2.4 percent in the third quarter from the year-ago period, missing a Reuters forecast for a 2.8 percent gain and following a rise of 2.4 percent rise in the previous quarter.

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Quarter-on-quarter, gross domestic product (GDP) grew 1.2 percent on an annualized basis compared with expectations for a 1.8 percent rise and after the 0.1 percent expansion in the second quarter.

Meanwhile, the Monetary Authority of Singapore (MAS), the city state's central bank, maintained its tight monetary policy, as expected, even as it lowered its core inflation forecast for the year to 2-2.5 percent from 2-3 percent, in its twice-annual assessment of the economy.

"The Singapore economy should expand at a moderate pace in the quarters ahead. Wage inflation is likely to remain relatively firm, and businesses in food-related and some services sectors could further pass on cost increases," the MAS said in its half-yearly statement.

After Q3 GDP missed estimates, where's Singapore headed?
After Q3 GDP missed estimates, where's Singapore headed?   

The Singapore dollar briefly turned weaker after the MAS lowered its inflation forecasts, but later reversed its losses and turned higher in line with gains in other Asian currencies.

Singapore's economy is heavily dependent on appetite from overseas markets. A slack in global demand, especially from the euro zone, will remain a challenge for growth going forward.

Last week, the IMF lowered its global growth forecast to 3.3 percent for the year from a 3.4 percent forecast made in July.

"I think that's going to be the concern now because Europe is the biggest export market for Singapore and Europe is struggling. So even though America is doing well, that's a bit of a headwind for Singapore for they would be worried," said Richard Jerram, chief economist at Bank of Singapore (BOS).

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The breakdown of the GDP figures showed manufacturing output rose 1.4 percent on year in the third quarter, compared with a 1.5 percent expansion the previous quarter.

Services output grew 2.9 percent on year in the three-month period, while the construction sector expanded 1.4 percent, the data showed.

DBS says Singapore was still experiencing 'slow growth': "The economy is merely grinding forward at half the standard speed," said analysts at the bank. "It's not exactly doom and gloom but just plain sideways moves in terms of outlook."