Q413 Performance Unlikely To Portend Protracted Slowdown

BMI View: Singapore's economy endured a quarterly contraction of 2.7% (quarter-on quarter, seasonally adjusted annualised rate [q-o-q SAAR]) in Q413, disappointing consensus estimates of a milder 1.3% decline. Still, real GDP growth for the entire year came in at a healthy 3.7%, just beating our forecast of 3.6% on the back of a strong performance from the services sector, and we do not believe that Q413's slowdown is indicative of a more protracted deceleration. With external conditions in 2014 likely to be slightly more friendly towards the city-state's beleaguered export sector, we retain our forecast for real GDP growth of 3.2% this year.

Singapore's real GDP growth slowed in Q413, with initial estimates of a 4.4% year-on-year (y-o-y) and -2.7% quarter-on-quarter, seasonally adjusted, annualised (q-o-q SAAR) performance failing to meet consensus expectations of 4.8% and -1.3%, respectively. The largest drag in q-o-q terms came from the construction sector, where activity shrank by 6.9% q-o-q SAAR versus a positive growth rate of 1.7% in Q313. Meanwhile, the previously buoyant services sector also lost steam, posting a 1.7% q-o-q SAAR contraction versus a 3.0% expansion in Q313.

However, as has long been the case with Singapore's economic activity figures, high levels of volatility from quarter to quarter are the norm rather than the exception, and we therefore do not view the most recent data as cause for concern over a more protracted slowdown. For instance, despite the fact that manufacturing activity contracted by 4.0% q-o-q SAAR (following a 1.2% expansion in Q313), much of this can be attributed to a retrenchment in the extremely volatile (and heavily cyclical) biomedical sector, suggesting that the slowdown will have little bearing on activity going forward.

Annual Figures Point To Stabilisation
Singapore - Real GDP, % chg q-o-q SAAR & y-o-y

BMI View: Singapore's economy endured a quarterly contraction of 2.7% (quarter-on quarter, seasonally adjusted annualised rate [q-o-q SAAR]) in Q413, disappointing consensus estimates of a milder 1.3% decline. Still, real GDP growth for the entire year came in at a healthy 3.7%, just beating our forecast of 3.6% on the back of a strong performance from the services sector, and we do not believe that Q413's slowdown is indicative of a more protracted deceleration. With external conditions in 2014 likely to be slightly more friendly towards the city-state's beleaguered export sector, we retain our forecast for real GDP growth of 3.2% this year.

Singapore's real GDP growth slowed in Q413, with initial estimates of a 4.4% year-on-year (y-o-y) and -2.7% quarter-on-quarter, seasonally adjusted, annualised (q-o-q SAAR) performance failing to meet consensus expectations of 4.8% and -1.3%, respectively. The largest drag in q-o-q terms came from the construction sector, where activity shrank by 6.9% q-o-q SAAR versus a positive growth rate of 1.7% in Q313. Meanwhile, the previously buoyant services sector also lost steam, posting a 1.7% q-o-q SAAR contraction versus a 3.0% expansion in Q313.

However, as has long been the case with Singapore's economic activity figures, high levels of volatility from quarter to quarter are the norm rather than the exception, and we therefore do not view the most recent data as cause for concern over a more protracted slowdown. For instance, despite the fact that manufacturing activity contracted by 4.0% q-o-q SAAR (following a 1.2% expansion in Q313), much of this can be attributed to a retrenchment in the extremely volatile (and heavily cyclical) biomedical sector, suggesting that the slowdown will have little bearing on activity going forward.

Annual Figures Point To Stabilisation
Singapore - Real GDP, % chg q-o-q SAAR & y-o-y

2014 Outlook Unchanged, But Growth Drivers To Shift

Indeed, the Q413 performance brings full-year real GDP growth to 3.7%, just above our forecast of 3.6% and considerably sprightlier than 2012's 1.3% figure. Given that Singapore's economy is generally viewed as somewhat of a bellwether for the wider region (and, indeed, the global economy) due to its high levels of external exposure, we remain relatively sanguine on the city-state's growth prospects for 2014. In particular, we note that the economy achieved a healthy growth rate in 2013 despite a torrid export performance, with total non-oil domestic exports (NODX) contracting by 6.1% from January-November against the same period in 2012. Even in view of the ongoing slowdown in China, external shipments should recover somewhat in 2014 on the back of improvements in the US and EU. Nevertheless, we also see downside risks to the domestic, services-fueled growth story, as an increasingly weak real estate market could take a bite out of both household expenditures as well as financial services activity. In result, we are happy to retain our 3.2% forecast for 2014 GDP growth.

Read the full article

This article is tagged to:
Sector: Country Risk
Geography: Singapore
×

Enter your details to read the full article

By submitting this form you are acknowledging that you have read and understood our Privacy Policy.