ECONOMIC SURVEY OF SINGAPORE (1Q2015)
(26 May 2015)
Opening Remarks
Good morning and welcome to MTI.
Details of Singapore’s economic performance for the first quarter and the growth outlook for 2015 are contained in the press release. Let me highlight a few key points.
The Singapore economy expanded at a moderate pace in the first quarter of 2015.
- The economy grew by 2.6 per cent on a year-on-year basis in the first quarter, faster than the 2.1 per cent growth in the preceding quarter. Growth was supported primarily by the finance & insurance and wholesale trade sectors.
- On a quarter-on-quarter seasonally-adjusted annualised basis, the economy expanded by 3.2 per cent, moderating from the 4.9 per cent growth in the preceding quarter.
The global economic outlook has remained broadly unchanged since the start of the year, with global growth in 2015 expected to come in marginally better than in 2014. The pace of growth is also likely to remain uneven across economies. While the advanced economies are expected to see a pick-up in growth, emerging markets and developing economies are projected to see slower growth.
- In the US, a combination of factors, such as the harsh winter, port strikes, the strong US dollar and a decline in oil and gas-related investments due to low oil prices, led to a sharp slowdown in growth in the first quarter. As the effect of some of these factors dissipates, the US economy is likely to pick up over the course of the year. For 2015 as a whole, the US economy is projected to see faster growth as compared to 2014, supported by domestic demand.
- The Eurozone economy is also expected to improve in 2015, supported by the quantitative easing measures that have been implemented since March. Further depreciation of the euro, as a result of the quantitative easing, will also help to boost the Eurozone’s export competitiveness. However, growth will likely remain modest due to sluggish labour market conditions and deflationary pressures.
- In Asia, China’s growth is projected to ease compared to the year before, weighed down by the on-going property market correction. Nonetheless, the slowdown is likely to remain contained as the Chinese government is expected to roll out additional easing measures to support growth. Meanwhile, growth in most key ASEAN economies is likely to improve in 2015 on the back of resilient domestic demand.
At the same time, the external outlook remains clouded with uncertainties and downside risks.
- In China, there remains the risk of a sharp correction in the real estate market, which could have severe negative spill-over effects on construction and real estate investment activities.
- In the Eurozone, there are uncertainties over Greece’s future in the bloc as well as fears of deflation in the region.
- In the US, there are lingering uncertainties over when, and the pace at which, the Federal Reserve will raise the Fed Funds rate. An unexpected tightening of monetary conditions could weigh on US’ financial markets and business sentiments.
- Finally, with low commodity prices, the appreciation of the US dollar and anticipated normalisation of US interest rates, emerging markets could face capital outflows and added pressures on their currencies and asset markets. This could in turn negatively affect their growth performance and increase financial market volatility.
Against this macroeconomic backdrop, the growth outlook for the Singapore economy in 2015 remains modest.
- Given the expected improvement in global economic conditions in 2015, externally-oriented sectors such as wholesale trade and finance & insurance are likely to see improved growth prospects. However, sector-specific factors could weigh on the growth of some sectors. For instance, low oil prices have dampened the outlook of the marine & offshore industry, while tourism-related sectors such as the accommodation & food services sector may face some headwinds in the near term due to lacklustre visitor arrivals.
- Domestically, the labour market is expected to remain tight, given low unemployment and elevated vacancy rates. As such, labour-intensive sectors such as construction, retail and food services may see their growth weighed down by labour constraints. Nonetheless, other domestically-oriented sectors such as business services are expected to remain resilient.
Taking into account the above factors, and barring the full materialisation of downside risks, the Singapore economy is expected to grow at a modest pace of 2.0 to 4.0 per cent in 2015.
In addition to the GDP forecast for 2015, I would like to take this opportunity to reiterate our revised medium-term GDP growth forecast range. As mentioned by DPM Tharman on 29 April, the Government now expects GDP to grow by between 2.0 to 4.0 per cent per annum from now till 2020. The revised medium-term forecast range takes into account downside risks arising from an uncertain global economic environment, as well as the expected slowdown in resident workforce growth due to our ageing population. Details can be found in the box article on “Singapore’s Economic Growth Potential Up To 2020” in this quarter’s Economic Survey of Singapore publication.
Together with my panel members, I will now take your questions.