SINGAPORE (May 8): After a long period of generally desultory performance, the Singapore economy is stirring. Economic growth has picked up, exports are reviving and even the property sector seems to be improving. Yet, other indicators are less exciting, raising the question of whether this rebound is sustainable. So, what is really going on and what are the prospects for Singapore?

Overall, the economy is gaining traction
Singapore’s economy expanded 2.5% in 1Q2017 over the same period in 2016, decelerating a tad from the 2.9% growth in 4Q2016 — but better than the average of below 2% growth from mid-2015 until 3Q2016. However, growth was uneven across sectors.

  • Manufacturing was solid. The once-beleaguered manufacturing sector is responding to the return to health of global and regional trade flows, expanding 6.6% in 1Q2017 after inching up only 3.6% in 2016. The electronics and precision engineering clusters showed particular strength, but biomedical manufacturing, transport engineering and general manufacturing lagged behind.
  • Construction activity contracted — for the third quarter running. Clearly, the slowdown in private-sector construction was too great to be offset by stillvibrant public-sector infrastructure and related spending.
  • Services sector still a shadow of its former self. Growth in services stood at 1.5% y-o-y in 1Q2017, better than the 1% at end-2016, but well below the 3.5%-to-6.5% range seen from 2013 to 2015. What growth there was in this sector depended heavily on the recovery in external trade — it was trade-related areas such as wholesale trade and transportation and storage that grew more strongly.

Still, there are grounds for optimism looking ahead
First, the forward-looking indicators such as new orders received suggest that activity can accelerate in the coming months. Import growth has been very strong, suggesting that businesses were importing intermediate goods for future production as well as capital goods to expand capacity.

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