Heading into the final weeks of 2017, the latest headlines in Singapore’s mainstream media have been generally positive. Pointing to a strengthening economy, Channel NewsAsia carried the Ministry of Trade and Industry’s advanced estimates that Singapore’s GDP grew of 4.6% in the third quarter of 2017. This is also expected to continue in 2018, reported by the Straits Times when it quoted the Monetary Authority of Singapore (MAS).
Some Recent Headline News In Singapore
In almost every aspect of the Singapore economy, positive news has infiltrated our newspapers and digital feeds. Here’s a selection of some recent news we’ve read on the newspapers.
On the jobs front, Business Times reported that over 4,000 new jobs would be created in the financial services and fintech sector as MAS announced new initiatives to bolster Singapore’s standing as a financial hub. Channel NewsAsia followed up with quotes from the MAS stating Singapore’s labour market “may have reached a turning point”.
On the back of this, firms have stated that they expect an uptick in business for the next six months, as reported on Business Times. The property sector, currently in an en-bloc frenzy, also experienced its first price improvements in private residential property prices as the Straits Times reported a third quarter rebound released by the Urban Redevelopment Authority.
In another story by Straits Times, the tourism industry is expected to remain rife as Changi Airport is set to welcome a record number of passengers this year. Even the ailing oil & gas and offshore & marine industries seem to be seeing light at the end of the tunnel, with oil prices hovering at US$60 a barrel, as reported by the Business Times.
Growth Came Primarily From The Manufacturing Sector
In its press release, the Ministry of Trade and Finance (MTI) reported that Singapore’s economy grew 4.6% on a year-on-year basis in the third quarter of 2017. This higher than the first and second quarter growth levels this year, which came in at 2.5% and 2.9% respectively.
While this may point to an accelerating growth for the city-state, a closer inspection of the figures revealed that the local Manufacturing sector put in a stellar shift in the third quarter. Expanding 15.5% in the third quarter, compared to 8.2% in the previous quarter, propping up overall growth figures in the quarter.
The Construction sector continued to contract at a pace of 6.3%, slightly improved from last quarter’s negative 6.8% growth, while the Services Industries as a whole grew 2.6%, slightly up from 2.5% in the previous quarter.
Compared on a quarter-on-quarter basis, the results become even more skewed, with Manufacturing sector growing 23.1% while the Construction Sector saw a 9.2% contraction. The Services Producing Industries also recorded lower growth at 1.5% compared to 3.3% in the previous quarter.
What Does This Mean For Singapore?
It’s definitely not a bad thing that Singapore experienced a healthy GDP growth this quarter. The only negative was that majority of it came from a narrow sector – the electronics, biomedical manufacturing and precision engineering sectors – and we should not start rejoicing.
On the bright side, much of the positive news reported in the papers may not have been fully realised in the current set of results. The en-bloc hype may only impact the property market starting early 2018 as the first of the cash payouts start going out. This could have a trickle-down impact as more properties get bought and sold, more demand in new property developments and a general increase in spending.
As oil prices continue to gather traction, any upturn in business-related activities may only be felt in the coming months or even as far away as 2018. This may have a positive impact for companies in the oil & gas, offshore & shipping and chemicals industries.
As the MAS does its part to ensure Singapore remains a viable finance hub in the world, improving business sentiments will also drive the labour market. Any sustained development of Singapore jobs industry, with productivity or new positions, will still be a long-term game, and may gradually impact headline numbers rather than have immediate bearing on the economy.
Global economic progress has also continued to strengthen. In its macroeconomic review, the MAS forecasted global growth improving to 4.3% and 4.1% in 2017 and 2018, higher compared to 3.8% growth last year. As a trade-reliant economy, this will continue to bolster Singapore’s overall growth. The stronger US and European economies may also provide momentum for growth in Singapore in 2018.
On the downside, as demand in the Manufacturing sector starts to normalise and pull back, this could have an adverse effect on growth numbers.
What Does All This Mean For Me?
With an improving global and Singapore economy, companies may be more willing to invest and increase hiring levels to expand their operations. With more jobs available, Singaporeans may also benefit with better job security and wages, which, in turn, could see them be more willing to spend as well. This should prop up local demand and consumption.
With the MAS focusing their attention on developing the talent pool and standing of financial services and fintech sectors in Singapore, it should see healthy demand and output in the coming months. The property and oil-related industries, which are seeing improving business sentiments in Singapore, will likewise see healthy demand.
The sectors that are already doing well, i.e the electronics, biomedical manufacturing and precision engineering sectors, may continue to outperform as a result of the current tech-related super-cycle in the near term.
As a result of a sturdier economy, equity and property investments could see gains at the same time. This is would be fuelled by the recent interest in properties, via en-blocs and stocks of developers. The demand for tech-related outputs may also continue to support business results of companies in the sector, as well as their stocks. The stabilising oil prices could also positively impact oil-related companies, and by extension their stocks.