ECONOMIC SURVEY OF SINGAPORE (2Q12)
(10 August 2012)
Opening Remarks
Good morning and welcome to MTI.
The Prime Minister announced two days ago that Singapore remained on track to achieve 1.5 to 2.5 per cent growth for 2012, which is within the 1 to 3 per cent announced earlier. Further details of growth performance for the second quarter and outlook are in the press release. Let me highlight a few key points.
The Singapore economy has contracted in the second quarter of 2012, compared to the preceding quarter, alongside weakened global macroeconomic conditions.
- On a quarter-on-quarter seasonally adjusted basis, the economy contracted marginally by 0.7 per cent, reversing the 9.5 per cent growth in the first quarter.
- The pull-back was largely due to the decline in externally-oriented sectors such as wholesale trade, tourism-related services, as well as electronics manufacturing. These sectors have been affected by sluggish external demand.
Although the economy continued to grow on a year-on-year basis in the second quarter, the gain was modest, at 2.0 per cent. This brought overall growth for the first half of 2012 to 1.7 per cent.
Growth outlook for the rest of the year is likely to remain subdued owing to several factors.
- In the US, weak labour market conditions have dampened household consumption. Business confidence and investment will be affected by the uncertain fiscal outlook in the lead-up to the Presidential election. Given the anemic domestic demand, growth is expected to remain sub-par for the rest of the year.
- The Eurozone is expected to enter into a mild recession in 2012. Domestic demand in the region will remain sluggish amidst ongoing fiscal consolidation and bank deleveraging.
- Domestic demand in Asia is expected to remain resilient, in part due to the support from accommodative fiscal and monetary policies. However, overall growth would be dampened by deteriorating export performance amidst sluggish global demand.
- In the midst of these difficulties, there are also considerable uncertainties. Notably, there are still uncertainties surrounding the process of fiscal consolidation in Greece, and whether it will continue to receive the financial support it requires. It is also still unclear whether Spain will require a full-scale external funding support.
- These uncertainties will continue to weigh on global economic confidence and growth.
As a result, near-term economic indicators for the domestic economy point towards subdued growth for the rest of the year.
- The Composite Leading Index has declined in the second quarter following two consecutive quarters of gain.
- Singapore’s Purchasing Managers’ Index fell into contractionary territory in July, due to declines in new orders.
- Visitor arrivals, which provided strong growth support in the past few years, are also showing some signs of moderating growth.
Nevertheless, there are still pockets of strength. Transport engineering is likely to see strong growth this year given the strong order books. The construction sector is also likely to post good growth this year, supported by construction activities such as infrastructure and industrial building.
Despite the external difficulties, we have assessed that the Singapore economy remains on track to achieve 1.5 to 2.5 per cent growth this year.
Together with my panel members, I will now take your questions.