Opening Remarks by PS Mrs Ow Foong Pheng for 2Q2015 Economic Survey of Singapore

​ ECONOMIC SURVEY OF SINGAPORE (2Q2015)

(11 August 2015)

Opening Remarks

Good morning and welcome to MTI.

Details of Singapore’s economic performance for the second quarter and the growth outlook for 2015 are contained in the press release. Let me highlight a few key points.

The Singapore economy expanded at a slower pace in the second quarter of 2015.

• The economy grew by 1.8 per cent on a year-on-year basis in the second quarter, moderating from the 2.8 per cent growth in the preceding quarter. The slowdown in growth can largely be attributed to weaker performance in the manufacturing and transportation & storage sectors.

•  On a quarter-on-quarter seasonally-adjusted annualised basis, the economy contracted by 4.0 per cent, a reversal from the 4.1 per cent growth in the preceding quarter.

For the first half of 2015, the economy grew by 2.3 per cent on a year-on-year basis, slower than the 2.9 per cent achieved in 2014. The slowdown in growth can be attributed to sluggish global economic conditions in the first half of 2015, as well as sector-specific factors.

For the rest of 2015, global growth is expected to pick up gradually, although the pace of growth is likely to be uneven across economies. In particular, the advanced economies are expected to see a gradual pick-up in growth, but the growth outlook of regional economies has generally softened.

• The US economy recovered in the second quarter following the harsh weather conditions experienced at the start of the year. For the rest of 2015, the US economy is projected to grow at a modest pace, supported by private domestic demand on the back of continued improvements in the labour and housing markets.

• The Eurozone economy is expected to improve in the second half of 2015, with growth supported by the quantitative easing measures that have been implemented by the European Central Bank since March. Further depreciation of the euro, as a result of the quantitative easing, will also help to boost the Eurozone’s export competitiveness. However, growth in the bloc will likely remain modest due to sluggish labour market conditions.

• In Asia, China’s growth is projected to ease, weighed down by the on-going property market correction and excess capacity in the heavy industries. Nonetheless, the stimulus measures implemented by the Chinese government are expected to contain downward pressures on the economy. The slowdown in the Chinese economy could in turn dampen the exports of key ASEAN economies. Weaker exports, coupled with softening domestic demand, could weigh on the growth of key ASEAN economies in the second half of the year.

At the same time, several key downside risks in the external economic environment remain.

• In China, the recent sharp correction in the stock market has heightened the risks to growth. In particular, consumer sentiments and spending in China could be adversely affected if the correction in the stock market worsens. There also continues to be the risk of a sharper-than-expected correction in the real estate market, which could have significant negative spill-over effects on construction and real estate investment activities.

• In the Eurozone, while Greece has averted the immediate risk of an exit from the bloc, there is continuing political uncertainty and the crisis could flare up again if the Greek government fails to adhere to the bailout terms.

• Finally, with low commodity prices, the appreciation of the US dollar and anticipated normalisation of US interest rates, regional countries could face capital outflows and added pressures on their currencies and asset markets.

 Against this macroeconomic backdrop, the Singapore economy is expected to grow at a modest pace in 2015.

• In line with the expected gradual pick-up in the global economy, externally-oriented sectors such as finance & insurance and wholesale trade are likely to support growth in the Singapore economy in the second half of 2015. However, sector-specific factors could continue to weigh on the growth of some externally-oriented sectors. For instance, sustained low oil prices could continue to dampen growth in the marine & offshore segment.

• On the other hand, domestically-oriented sectors such as business services and information & communications are expected to see modest growth for the rest of the year. With the labour market expected to remain tight, growth in some labour-intensive sectors such as food services may be weighed down by labour constraints.

Taking these factors into account, the 2015 growth forecast for the Singapore economy is narrowed to
2.0 to 2.5 per cent, from 2.0 to 4.0 per cent.  

We will now take your questions.