Opening remarks by PS Mr Gabriel Lim for Third Quarter 2019 Economic Survey of Singapore

1 Good morning and welcome to MTI. 

2 I will highlight the key points from the press release.

3 Singapore’s real GDP grew by 0.5 per cent on a year-on-year basis in the third quarter, slightly faster than the 0.2 per cent growth in the second quarter. On a quarter-on-quarter seasonally-adjusted annualised basis, the economy expanded by 2.1 per cent, a reversal from the 2.7 per cent contraction in the preceding quarter. 

4 The key sectors that supported GDP growth in the third quarter were the finance & insurance, other services and information & communications sectors. Within the manufacturing sector, the electronics cluster continued to contract on the back of a decline in semiconductor output. However, the biomedical manufacturing cluster and the aerospace engineering segment of the transport engineering cluster posted stronger-than-expected expansions. The wholesale & retail trade sector also shrank during the quarter, weighed down by the weak performance of our electronics exports.

5 Given the performance of the Singapore economy in the third quarter, GDP growth in the first three quarters of the year was 0.6 per cent on a year-on-year basis.   

Economic Outlook for 2019

6 Since the last Economic Survey of Singapore media briefing in August, there are signs of stabilisation in the global economy even though global growth remains weak. Domestically, the manufacturing sector also performed better than expected in the third quarter. 

7 For the remaining quarter of the year, MTI expects the performance of the manufacturing sector and trade-related services sectors such as wholesale trade to remain subdued in view of the ongoing downswing in the global electronics cycle. However, sectors such as construction, information & communications, finance & insurance, and education, health & social services should continue to post steady growth.

8 Taking into account the performance of the Singapore economy in the first three quarters of the year, and the outlook for the fourth quarter, the full-year GDP growth forecast is narrowed to “0.5 to 1.0 per cent”, from “0.0 to 1.0 per cent”.

Economic Outlook for 2020

9 Looking ahead to 2020, while global growth is projected to see a modest pickup, growth in several of our key final demand markets is expected to ease. 

• Growth in the US economy is projected to moderate further in 2020, as investment growth is expected to continue to slow amidst prolonged trade tensions and policy uncertainty.

• The Eurozone economy is expected to grow at a slightly faster pace in 2020, with continued support coming from domestic demand.

• In Asia, growth in China’s economy is projected to slow in 2020 as investment growth is expected to decelerate following financial reforms to curb shadow lending. Existing US tariffs are also likely to continue to weigh on exports. Within ASEAN, growth in the key economies is expected to remain resilient on the back of support from private consumption.

10 At the same time, uncertainties in the global economy remain. 

• First, notwithstanding the resumption of trade talks and the announcement of a partial trade deal, US-China trade tensions remain a source of risk. There is also a possibility that tensions could escalate again given the unresolved issues between the two countries.

• Second, a steeper-than-expected slowdown of the Chinese economy could be brought about by additional tariffs imposed by the US and sharper-than-anticipated tightening of financial conditions due to domestic deleveraging efforts.

• Third, Brexit-related uncertainties remain given upcoming elections in the UK and the decision to further delay Brexit.

• Fourth, ongoing uncertainties in Hong Kong and geopolitical tensions in the Middle East could lead to financial market volatility, and have negative spillover effects on the region and Singapore.

11 On balance, given the growth outlook for Singapore’s key final demand markets and the projected recovery in the global electronics cycle in the year ahead, MTI expects growth in the Singapore economy to pick up modestly in 2020 as compared to 2019.

12 In particular, the manufacturing sector is expected to return to positive growth, led by a gradual recovery in the electronics and precision engineering clusters. This would also support growth in related sectors such as wholesale trade. At the same time, growth in the information & communications and finance & insurance sectors is expected to remain healthy, bolstered by firms’ healthy demand for IT and digital solutions and sustained demand for payment processing services respectively. Meanwhile, the education, health & social services segment should remain resilient as operations in healthcare facilities continue to ramp up. The construction sector is also projected to see sustained growth in the coming year.

13 Taking into account the global and domestic economic environment, the Singapore economy is expected to grow by “0.5 to 2.5 per cent” in 2020.

14 Together with my panel members, I am happy to take your questions.