It’s no secret that the manufacturing sector’s performance has been disappointing. This has been particularly evident in the Offshore and Marine Engineering Industry, a major contributor to the city-state’s gross domestic product. The industry saw major players suffer as much as 70% drops in profit from the previous financial year, and experts warn that it is only the tip of the iceberg.
There was a drop in output in the electronics, precision engineering and transport engineering sectors as well. Overall, a 6.2% annual contraction was observed in the manufacturing industry, which was not only worse than the estimated annual contraction of 6%, but also a continued decline from the previous quarter of 4.8%. In addition, a projection of Q3 2015 estimated a 3.6% drop for the manufacturing sector from Q3 2014 but it performed worse than expected with a 4.6% drop.
Given such a contractions in the manufacturing industry, there wasn’t much hope for the economy during this third quarter.
Beating the odds
However, the services sector demonstrated a stronger performance, much stronger than expected, and essentially averted a technical recession in Singapore’s economy for the third quarter of 2015. The sector went up by 3.5% this quarter, dominantly ousting the predicted growth of 0.8%. In addition, the wholesale and retail trade market posted a 5.3% expansion.
This meant that even with the poor performance of the manufacturing industry, and accounting for seasonal adjustments, the economy actually reversed the 2.6% contraction in the second quarter and expanded by 1.9% in the third quarter. This is much higher than the estimated 1.4% predicted expansion.
Looking to better times
While the government has had to adjust its expected full annual growth projection down from 2.5% to about 2%, the Ministry of Trade and Industry (MTI) announced that it expects growth in 2016. These numbers will be lower than 2.9% seen last year and the weakest performance of Singapore’s economy since 2009.
However, economic growth expectations are hinged on the reasoning that the global economy is expected to improve next year because of advances and economic improvements in the emerging markets as well as developing economies. As a result, Singapore’s economic growth has been set at between 1 and 3 percent for next year, if everything goes as expected.
The Ministry is fully aware of the downside of having a global outlook. For instance, if the reforms being made to re-balance China’s economy falter, then there will be a sizable drop in their demand for products from the city-state which may affect the feasibility of the predicted economic growth range.