ECONOMIC SURVEY OF SINGAPORE (2017) (14 February 2018) 

Opening Remarks by Mr Loh Khum Yean, Permanent Secretary for Trade & Industry

1      Good morning and welcome to MTI.

2      Details of Singapore’s economic performance in the fourth quarter of 2017 and the full year of 2017, as well as the growth outlook for 2018 are contained in the press release. Let me highlight the key points.

3     Growth in the Singapore economy eased in the fourth quarter of 2017.

• On a year-on-year basis, GDP grew by 3.6 per cent in the fourth quarter, easing from the 5.5 per cent growth in the third quarter.  Growth during the quarter was supported by externally-oriented sectors such as manufacturing, finance & insurance, wholesale trade, and transportation & storage.
• On a quarter-on-quarter seasonally-adjusted annualised basis, the economy expanded by 2.1 per cent, a moderation from the 11.2 per cent growth in the third quarter.

4      For 2017 as a whole, the economy grew by 3.6 per cent, faster than the 2.4 per cent growth in 2016. Growth was driven by externally-oriented sectors such as manufacturing, finance & insurance, wholesale trade, and transportation & storage on the back of a rebound in the global economy.

5     2017 also saw a strong pickup in productivity, in line with the cyclical upswing. Overall labour productivity, as measured by VA per actual hour worked, grew by 4.5 per cent in 2017, the highest recorded since the rebound year of 2010 and a significant improvement from the 1.8 per cent achieved in 2016. The strong productivity performance in the overall economy was primarily due to productivity gains in externally-oriented sectors, especially the manufacturing sector.  More details on our productivity performance in 2017 can be found in the box article in the Economic Survey of Singapore publication.

6       Let me now turn to the economic outlook for 2018.

7       Since the last Economic Survey of Singapore media briefing in November last year, the outlook for global growth has improved slightly. The IMF has upgraded its global growth forecast for 2018 to 3.9 per cent, partly on the back of higher growth expected in the US due to the recently approved tax reforms. However, as compared to 2017, growth in most of Singapore’s key final demand markets like the Eurozone, Japan, NIEs and ASEAN-5 is projected to moderate or remain unchanged in 2018.

• In the US, GDP growth is projected to improve further in 2018, supported by domestic demand and fiscal stimulus arising from the recently approved tax reforms. First, stable labour market conditions, along with rising wages, are likely to support private consumption. Second, the manufacturing and non-manufacturing PMIs in the US continue to be in expansionary territory, indicating a positive outlook for economic activities. Third, tax reforms, particularly the corporate tax cut, are expected to boost investment expenditure in the US. However, growth could come in lower than projected if the response of investment to the tax cut is more modest than anticipated.
• The Eurozone’s growth is projected to ease in 2018 following the rebound seen in 2017. Domestic demand is expected to remain resilient on the back of improving labour market conditions, as well as healthy business and consumer sentiments. At the same time, monetary policies in the region are likely to remain largely accommodative.
• In Asia, China’s growth is expected to moderate in 2018 as the government’s policy focus shifts towards high-quality growth. In particular, sustained efforts to promote supply-side structural reforms and slower credit growth arising from continued financial deleveraging are likely to weigh on investment spending and hence GDP growth. Nonetheless, consumption is likely to remain stable and provide some support to growth. Meanwhile, growth in the key ASEAN economies is expected to remain firm in 2018, supported by sustained improvements in domestic demand and merchandise exports.

8     On balance, MTI’s assessment remains that the external demand outlook for Singapore is expected to be slightly weaker in 2018 as compared to 2017. Furthermore, while global macroeconomic risks have receded to some extent since the end of 2017, there remain some downside risks that could weigh on the global economy if they materialise.

• First, concerns over protectionist sentiments and in particular, the US administration’s trade policies remain. An increase in trade barriers could adversely affect global trade, with spillover effects on economic growth worldwide.
• Second, an upside surprise in inflation could cause monetary policy in the US to normalise faster than expected. This could in turn cause global financial conditions to tighten more than anticipated, and potentially lead to sharp corrections in financial markets. Should this occur, regional economies with elevated debt levels could be disproportionately affected, and there could be some pullback in investment and consumption growth in these economies.

9     Against this backdrop, the pace of growth in the Singapore economy is expected to moderate in 2018 as compared to 2017, but remain firm. 

• First, the manufacturing sector is likely to continue to expand and provide support to growth in the overall economy in 2018. In particular, the electronics and precision engineering clusters are projected to sustain a healthy, though more moderate, pace of growth in 2018 on the back of robust global demand for semiconductors and semiconductor equipment.
• Second, externally-oriented services sectors such as the finance & insurance, transportation & storage and wholesale trade sectors are expected to benefit from firm external demand, although their pace of growth is also likely to ease in 2018.
• Third, growth is expected to broaden to domestically-oriented services sectors like retail and food services on the back of an improvement in consumer sentiments amidst the on-going recovery in the labour market. Meanwhile, the information & communications and education, health & social services sectors are expected to remain resilient.
• However, the performance of the construction sector is likely to remain lacklustre in 2018, as the earlier weakness in construction demand, particularly from the private sector, continues to weigh on construction activities. The outlook for the marine & offshore engineering segment is also expected to remain challenging due to weak demand conditions faced by local yards and firms producing oilfield and gasfield equipment.

10     Taking into account the global and domestic economic environment, MTI has maintained the 2018 GDP growth forecast at “1.5 to 3.5 per cent”. MTI’s central view is that growth is likely to come in slightly above the middle of the forecast range.

11     Together with my panel members, I am happy to take your questions now.