SINGAPORE (The Straits Times/Asia News Network): Singapore’s economy grew at a faster than expected pace in the third quarter of 2023 on the back of a continued recovery in visitor arrivals, even as manufacturing remained weak.
Gross domestic product (GDP) for the July-September period grew 0.7 per cent year on year, according to advance estimates from the Ministry of Trade and Industry on Friday (Oct 13).
This was better than the second quarter, when the economy grew 0.5 per cent year on year.
On a quarter-on-quarter seasonally adjusted basis, the economy expanded 1 per cent, faster than the 0.1 per cent growth in the preceding quarter.
The showing beat analysts’ estimates, with the median forecast in a Bloomberg survey of economists for the economy to expand 0.4 per cent in the third quarter from a year ago and grow 0.6 per cent from the previous three months.
As at September, the Monetary Authority of Singapore expected 2023 headline inflation to average 4.5 per cent to 5.5 per cent and core inflation to average 3.5 per cent to 4.5 per cent.
The Government had narrowed its 2023 growth estimates to a range of 0.5 per cent to 1.5 per cent from 0.5 per cent to 2.5 per cent previously amid China’s faltering recovery and a global demand downturn.
The advance estimates, computed largely from data in July and August, showed the manufacturing sector contracted by 5 per cent on year in the third quarter, following a 7.7 per cent contraction in the second quarter.
Output fell across all the manufacturing clusters, except for the transport engineering cluster.
On a quarter-on-quarter seasonally adjusted basis, the sector expanded by 0.2 per cent, a turnaround from the 1.5 per cent contraction in the second quarter.
The construction sector grew by 6 per cent year on year in the third quarter, extending the 7.7 per cent growth in the preceding quarter. Growth was supported by expansions in both the public and private sectors.
On a quarter-on-quarter seasonally adjusted basis, the sector posted growth of 0.6 per cent, moderating from the 2.7 per cent growth in the second quarter.
Among the services sectors, the wholesale and retail trade as well as transportation and storage sectors collectively expanded by 0.6 per cent year on year in the third quarter, slower than the 2.2 per cent growth in the previous quarter.
Growth in the wholesale trade sector was mainly driven by the fuels and chemicals segment, while the transportation and storage sector was supported by the air transport segment.
Together, the wholesale and retail trade as well as transportation and storage sectors shrank by 0.1 per cent in the third quarter, a reversal from the 3 per cent expansion in the preceding quarter.
The group of sectors comprising information and communications, finance and insurance as well as professional services sectors expanded by 1.5 per cent on year in the third quarter, following a 1.2 per cent growth in the previous quarter.
Growth in the information and communications sector was supported by the information technology and information services segment, while growth in the professional services sector was driven by the architectural and engineering, technical testing and analysis and other professional, scientific and technical services segments.
However, the finance and insurance sector contracted, largely due to the weak performance of the banking and insurance segments.
Accommodation and food services, real estate, administrative and support services and other services sectors grew by 4.7 per cent year on year in the third quarter, slower than the 6.1 per cent growth in the previous quarter.
The accommodation sector saw robust growth on the back of the continued recovery in international visitor arrivals.
The sectors within the group collectively expanded by 1.4 per cent in the third quarter, accelerating from the 0.4 per cent growth in the preceding quarter.
Dr Chua Hak Bin, an economist at Maybank, told The Straits Times that the third-quarter GDP growth was above expectations, as the Ministry of Trade and Industry (MTI) had factored in a manufacturing recovery in September, though the September data has not been released yet.
“The third-quarter manufacturing growth estimate of minus 5 per cent implicitly assumes that manufacturing recovered and contracted by only minus 1.8 per cent in September, from the deep minus 12.1 per cent contraction in August,” he said.
“Several other Asian countries including South Korea and Vietnam are seeing an improvement in electronics manufacturing and exports in September, which may justify MTI’s bullish forecast,” he added.
Dr Chua said the cooler services growth was within expectations, reflecting fading reopening tailwinds and slowing trade-related wholesale and transport services growth.
Maybank is keeping its GDP growth forecast at 0.8 per cent for 2023 and 2.2 per cent in 2024.