Singapore grew a surprise 5.7 percent on-quarter on an annualized basis in the final three months of 2015, data released Monday showed, but a more tepid 2.1 percent for the full year.
The city-state revealed fourth-quarter gross domestic product (GDP) of 2 percent on-year, well above estimates of 1.3 percent, according to a Reuters poll. The 5.7 percent on-quarter growth beat estimates of a 1.7 percent expansion. The Singapore dollar strengthened against the dollar on the unexpectedly strong quarterly growth number, but later lost ground.
But 2015 growth of 2.1 percent was the most sluggish expansion recorded by Singapore since 2009, when the economy contracted 0.6 percent. Last year's growth number compares to 2.9 percent growth in 2014.
Manufacturing has dragged on the Singapore's economy, contracting 6 percent on-year in the fourth quarter, on top of a 5.9 percent contraction in Q3. But the services sector expanded by 3.2 percent compared to the same period in 2014, and construction grew 2.2 percent.
A note from DBS analysts noted that services accounted for about two-thirds of the Singaporean economy and thus a good performance in services can lift the entire economy.
"However, while this sector is known to be a resilient and stable engine of growth for Singapore, performance of the sector going forward will continue to be affected by the existing domestic manpower crunch and drag from the manufacturing sector," the DBS note said.
DBS added that manufacturing in Singapore faced further headwinds in 2016.
"External competition, rising business costs and weak external demand were key challenges facing the manufacturing sector for the past years. And the outlook is expected to remain dicey judging from conditions in the external environment," it said.
DBS expects Singapore's growth outlook over the coming two to three quarters to be tepid, before an improvement is seen in the later half of 2016 that should bring overall GDP growth for the year to 2.1 percent.