Senior Minister of State Lee Yi Shyan's reply to Parliament Questions on risks to the Singapore economy in light of weak Q3 GDP data

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Question:

Ms Foo Mee Har: To ask the Minister for Trade and Industry in light of weak Q3 GDP data, what are the risks to the Singapore economy and whether there are any counteracting measures planned to strengthen the economy.

Oral Answer by Mr Lee Yi Shyan, Senior Minister of State for Trade and Industry:

1. Based on advance estimates, the Singapore economy grew by 2.4 per cent on a year-on-year basis in the third quarter of 2014, the same pace of growth as in the previous quarter. On a quarter-on-quarter seasonally-adjusted annualised basis, the economy expanded by 1.2 per cent, a reversal from the 0.1 per cent contraction in the previous quarter.

2. Growth in the third quarter was supported by the manufacturing sector and key services sectors. Within manufacturing, the electronics and biomedical manufacturing clusters were the main drivers of growth. Among the services sectors, the finance and insurance and business services sectors performed well on a year-on-year basis, even as growth in some labour-intensive sectors, like food and beverage services, was weighed down by labour constraints. On the other hand, the construction sector slowed sharply as a result of weaker private sector construction activities, following several rounds of cooling measures in the residential property market.

3. Overall, taking into account the third quarter performance, GDP growth in the first three quarters of 2014 is estimated to be 3.2 per cent. For the full year, the Singapore economy remains on track to achieving the growth forecast of 2.5 to 3.5 per cent. This is a healthy rate of growth considering the sluggish global economic conditions and on-going domestic restructuring.

4. In terms of the risks to the economy, MTI’s assessment is that the key risks stem from uncertainties in the global macroeconomic environment. In the US, there are uncertainties over the pace at which the Federal Reserve will exit from its accommodative monetary policy. In China, there are risks of a sharper-than-expected slowdown, given the possibility of a spike in debt defaults amidst tighter regulations in the shadow banking sector and a slowdown in real estate activities. In addition, on-going geopolitical tensions in the Middle East and Ukraine, as well as the risk of an Ebola outbreak globally pose downside risks to the global economy. Should any of these risks materialise, the Singapore economy may grow more slowly than expected.

5. Nonetheless, as the global situation remains fluid, MTI will continue to monitor the situation closely, and stands ready to respond in the event of any short-term shocks to the economy. At the same time, the Government will continue to press ahead with efforts to restructure the economy so as to position the economy for sustainable growth and create good jobs for Singaporeans over the longer term. These include helping firms to raise productivity through the various assistance schemes, as well as helping Singaporeans to develop skills relevant to the future economy through the setting up of the SkillsFuture Council.