Opening remarks by PS Mr Loh Khum Yean for Economic Survey of Singapore First Quarter 2017

ECONOMIC SURVEY OF SINGAPORE 2017

(25 May 2017)

Opening Remarks by Mr Loh Khum Yean, Permanent Secretary for Trade & Industry

1 Good morning and welcome to MTI. 

2 Details of Singapore’s economic performance for the first quarter and the growth outlook for 2017 are contained in the press release. Let me highlight the key points.

3 On a year-on-year basis, GDP grew by 2.7 per cent in the first quarter, easing from the 2.9 per cent growth in the fourth quarter of 2016. Growth was primarily supported by the manufacturing, transportation & storage and business services sectors. On a quarter-on-quarter seasonally-adjusted annualised basis, the economy contracted by 1.3 per cent, after posting a strong growth of 12.3 per cent in the fourth quarter of 2016.  

4 At the last Economic Survey of Singapore media briefing in February, MTI highlighted that global growth was projected to pick up in 2017. Since then, the global economic outlook has improved slightly. 

• In the US, while growth in the first quarter came in weaker than expected, the slowdown in growth momentum is likely to be transitory. For the full year, the US economy is projected to grow at a faster pace, supported by domestic demand. In particular, resilient labour and housing market conditions are expected to support private consumption and residential investments.  

• Growth in the Eurozone economy is projected to remain modest in 2017. Improving business and consumer sentiments, coupled with accommodative monetary policies, is expected to support growth. On the other hand, consumption growth may be dampened by rising energy prices, which could have a negative impact on consumers’ real disposable income.

• In Asia, China’s growth is projected to ease marginally in 2017, as investment growth is expected to continue to slow. However, on-going fiscal stimulus should provide support to the Chinese economy. Within ASEAN, growth among the key economies is expected to pick up in 2017, supported by resilient domestic demand and the recovery in merchandise exports. 

5 Despite the improved growth prospects for the global economy, uncertainties and downside risks remain. 

• First, rising anti-globalisation sentiments could have an adverse impact on global trade if they lead to increased protectionism, with knock-on effects on global growth. Political risks and economic uncertainties also persist, including in Europe where the UK is navigating through “Brexit” and in the US where policy uncertainties remain elevated.

• Second, monetary conditions may tighten further in China amidst efforts to contain leverage and risks in the financial system. Should there be a steeper-than-intended pullback in credit, investment spending and hence growth in China could slow down more sharply than expected.

6 Against this external backdrop, trade-related sectors such as the manufacturing and transportation & storage sectors are likely to provide support to the Singapore economy this year. In particular, growth in the electronics and precision engineering clusters is expected to be sustained for the rest of the year on the back of the strong recovery in global demand for semiconductors and semiconductor manufacturing equipment. Likewise, the transportation & storage sector is likely to benefit from the projected improvement in global trade flows. 

7 Meanwhile, the information & communications and education, healthcare & social services sectors are expected to remain resilient. However, cautious consumer sentiments amidst sluggish labour market conditions are likely to weigh on the food services and retail trade segments, while the construction sector is expected to be adversely affected by the weakness in private sector construction activities.

8 Taking these factors into account, the GDP growth forecast for 2017 is maintained at “1.0 to 3.0 per cent”. Although the overall performance of the economy was resilient in the first quarter, and the global growth outlook has improved slightly, downside risks in the global economy remain. Barring the materialisation of these downside risks, GDP growth is likely to come in higher than the 2.0 per cent in 2016.   

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