Singapore more than triples earlier Q4 growth print

Tourists taking photographs at the Merlion park in Singapore.
Roslan Rahman | AFP | Getty Images

Singapore's economy grew at a much faster pace than earlier thought in the fourth quarter, after the performance of both manufacturing and services sectors were revised upwards, data on Tuesday showed.

The wealthy city state expanded an annualized 4.9 percent in the three months ending December from the previous quarter, better than a 2.1 percent estimate from Reuters and much better than the 1.6 percent previous print.

Year on year, the economy clocked a 2.1 percent growth pace, higher than the 1.7 percent consensus and compared with the 1.5 percent earlier estimate.

Manufacturing growth declined 1.3 percent in the three months ending December from the year before, better than a decline of 2 percent assumed in the advance growth estimates. The services sector, meanwhile, grew an annual 3.1 percent in the quarter, faster than the 2.6 percent earlier estimate.

Despite the stronger showing, market watchers highlight concerns for both sectors in the months ahead.

"We believe the outlook for the manufacturing sector will remain tepid in the coming months as external headwinds remain strong, with pockets of downside risks in the global economy," said DBS economist Irvin Seah.

On the services front, a "labor crunch amid domestic restructuring will continue to weigh on the performance of this sector in the coming quarters," he added.

Singapore's economy has been hampered by lackluster exports, and economists maintain that its outlook remains uncertain even as January's non-oil domestic exports (NODX) released Tuesday showed a rise 4.3 percent, beating a Reuters forecast for a 1.9 percent uptick. 

"Going forward, the outlook for the three key trading partners - China, Eurozone and Japan – is expected to remain dicey while the recovery in the US economy has been slow," said Seah.

 "There are downward pressures on the GDP growth trajectory in the first quarter of the year judging from the current global economic conditions," he added, noting that his growth forecast for 2015 remains at 3.2 percent, with risk on the downside.

The Monetary Authority of Singapore (MAS), the state's default central bank, surprised markets last month by easing monetary policy to stem slowing inflation as oil prices collapsed, and further action is not ruled out if the economic outlook does not improve.

"Singapore's Q4 Final GDP was revised higher, however this does not change the trend in growth," according to a note from ANZ. "Further action by MAS would likely stem from growth undershooting their expectations, rather than the pricing side. We will get Q1 GDP data before their meeting in April."

To be sure, not everyone's as downbeat. Barclays expects Singapore's economy to "accelerate modestly" to 3.4 percent this year.

We believe stronger growth in the US and Asean – and the tailwind from lower oil prices – will likely prove to be offsetting factors, with the lift from lower oil likely to become more apparent in H2," analysts at the bank said in a note.

"In the near term, although we expect inflation to remain subdued, we do not believe it will lead the MAS to further downgrade its inflation forecasts. As such, we continue to expect the MAS to keep policy on hold when it next issues its semiannual policy statement," they added.

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