​Recent Trends In Singapore's Real Gross Fixed Capital Formation

This article examines recent trends in Singapore’s real gross fixed capital formation (GFCF). We find that the decline in Singapore’s real GFCF in 2014 and 2015 was mainly due to a contraction in private GFCF, which could in turn be partly attributed to a decline in private machinery & equipment (M&E) investments. Factors that may explain the decline in private M&E investments include heightened global economic uncertainty, the cyclical downturn in manufacturing, and the shift towards services in the Singapore economy. Using an error correction model, we find that global economic uncertainty was the main contributor to the decline in private M&E investments in Singapore in the last two years, although the latter two factors also contributed to the weakness.

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