World Economy

Singapore's economy hits a bump in fourth quarter

Why did Singapore GDP miss estimates?
Why did Singapore GDP miss estimates?

Singapore's economy expanded 4.4 percent on year in the final quarter of 2013, below market expectations, data on Thursday showed.

Economists polled by Reuters had forecast a rise of 4.7 percent. The number also marked a slowdown from a revised 5.9 percent rise in the third quarter.

Measured on a quarterly, annualized basis, economic growth in the city state fell 2.7 percent in the last quarter of 2013 compared with analyst expectations for a 1.6 percent fall.

(Read more: Singapore upgrades growth outlook for the full year)

"Because of a better Q3 revised number, the slowdown in the quarterly Q4 number got bigger," Alvin Liew, senior economist at UOB told CNBC Asia's "Squawk Box" on Thursday.

"But be mindful that this is an initial number itself. Next month, we might get another slight revision so the full-year growth numbers could be a bit higher," he added.

Marina Bay Sands Singapore.
Wu Lingyun | FlickrVision | Getty Images

Economists say the gross domestic product (GDP) data from Singapore is important since the country has a small open economy and can often be a good barometer of global inflection points.

The data showed growth slowed across all sectors, with the manufacturing sector especially sluggish.

"Nevertheless, that does not distract from two things. First, the landscape for sustained recovery remains intact; in line with improving global demand conditions," analysts at Mizuho Corporate Bank said in a note.

"This in turn is reflected in the decisive bottoming in port activity and industrial output," they added. "The second point (more a nuance), is that the recovery will be measured and perhaps bumpy."

The Singapore dollar weakened slightly following the weaker-than-expected GDP numbers, trading at 1.2642 to the U.S. dollar compared with 1.2627 in early Asian trade.

(Read more: For foreigners, has securing a job in Singapore just gotten harder?)

Liew said broad strength in the U.S. currency signaled weakness in the Singapore dollar over the course of the year. He expects the Singapore dollar to end 2014 at around 1.33 per U.S dollar.

"For Singapore, we are seeing a weaker Singapore dollar but then the property market is still a long-term investment for us," Liew said, talking about the impact of higher U.S. interest rates on Asia. "Sales fell off quite sharply last year and this year, they might do slightly better."

Analysts at OCBC bank said they were keeping their 2014 Singapore GDP forecast unchanged at 3-4 percent following the release of the fourth quarter growth data.

The Singapore government forecasts the economy to grow by 2-4 percent this year.