ECONOMIC SURVEY OF SINGAPORE 2018
(13 August 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 for the second quarter and 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 second quarter of 2018.
- On a year-on-year basis, GDP grew by 3.9 per cent in the second quarter, easing from the 4.5 per cent growth in the first quarter. Growth was primarily supported by the manufacturing, finance & insurance, wholesale trade and business services sectors.
- On a quarter-on-quarter seasonally-adjusted annualised basis, the economy expanded by 0.6 per cent, slower than the 2.2 per cent growth in the preceding quarter.
4. Taking into account the performance of the economy in the first quarter of 2018, GDP grew by 4.2 per cent on a year-on-year basis in the first half of the year.
5. Since the last Economic Survey of Singapore media briefing in May, the growth outlook of some of the key advanced economies such as the Eurozone and Japan has weakened slightly, in part due to their weaker-than-expected performance in the first half of 2018. Looking ahead, growth in several of Singapore’s key final demand markets is expected to moderate in the second half of the year as compared to the first half of the year.
- In the US, following the strong performance of the economy in the first half of 2018, GDP growth is expected to moderate in the second half of the year. Growth for the rest of the year will continue to be supported by domestic demand. Resilient labour market conditions are likely to support private consumption, while private investment, which has been boosted by the tax reforms implemented at the start of the year, is expected to remain firm.
- The Eurozone’s growth came in weaker than anticipated in the first half of 2018, and is likely to remain largely subdued for the rest of the year. Nonetheless, domestic demand is expected to provide some support to growth in the second half of 2018. In particular, labour market conditions are likely to see further improvements, thereby supporting private consumption, while financing conditions are expected to remain largely accommodative.
- In Asia, China’s economy expanded at a slower pace in the second quarter as compared to the first quarter. Growth is projected to ease further in the second half of 2018. In particular, exports growth is expected to moderate, partly due to the high base in 2017. Investment growth is also likely to slow slightly, although some support could come from an acceleration in local government bond issuance and tax cuts. Within ASEAN, growth in the key economies is expected to remain firm for the rest of the year, supported by sustained improvements in domestic demand as well as merchandise exports.
6. At the same time, uncertainties and downside risks in the global economy have also increased since three months ago.
- First, recent tariff measures by the US have led to retaliatory tariffs imposed on the US by China, the EU and several of the US’ key trading partners. There is a risk of a further escalation of the ongoing trade conflicts that could lead to a vicious cycle of tit-for-tat measures between the US and other major economies. Should this happen, there could be a sharp fall in global business and consumer confidence, and in turn, investment and consumption spending. This could then have an adverse impact on global trade flows and global growth.
- Second, against the backdrop of generally tightening global financial conditions, an upside surprise in inflation could lead to a faster-than-expected normalisation of monetary policy in the US. This could trigger disorderly capital outflows from emerging market economies in the region, causing financial vulnerabilities in these economies to surface, particularly for those with elevated debt levels. If this occurs, there could be some pullback in investment and consumption growth, with spillover effects on the rest of the region.
7. Against this backdrop, MTI expects the pace of growth in the Singapore economy to moderate in the second half of 2018, following the strong performance in the first half of the year. Growth will continue to be supported primarily by outward-oriented sectors. In particular, the manufacturing sector is expected to continue to expand, supported in part by the electronics cluster, although growth will moderate from the high levels seen in the first half of the year. Similarly, while outward-oriented services sectors such as finance & insurance, wholesale trade and transportation & storage are projected to remain on an expansionary path, their growth momentum is likely to ease in tandem with the moderation in growth projected for key advanced and regional economies in the remaining quarters of the year.
8. Meanwhile, growth in domestically-oriented services sectors like retail and food services is likely to be supported by a pickup in consumer sentiments amidst improvements in the labour market. Sectors like information & communications and other services are also projected to remain resilient. However, the performance of the construction sector is likely to stay lacklustre for the rest of the year, given the earlier weakness in contracts awarded.
9. Taking into account these factors, as well as our GDP performance in the first half of the year, the GDP growth forecast for 2018 is maintained at "2.5 to 3.5 per cent”.
10. Together with my panel members, I am happy to take your questions now.