Singapore economy shrinks 4.1 percent in third quarter
SINGAPORE: Singapore’s export-driven economy shrank the most in four years in the third quarter, officials said yesterday, as manufacturing sharply contracted on weaker global demand. The city-state, which is regarded as a bellwether for Asia’s other trade-reliant economies, has been hit hard by the slump in crude prices and sluggish world growth, which have hurt its key oil and gas services sector. Its central bank, which uses the exchange rate rather than interest rates to keep prices stable, yesterday maintained its monetary policy of zero-percent appreciation in the exchange rate for the local currency. The economy contracted 4.1 percent in the September quarter from the previous three months, according to preliminary data released by the trade ministry.
That compares to analyst expectations for flat growth and comes after a 0.2 percent increase in the previous three months. On an annual basis, growth came in at an anaemic 0.6 percent, the slowest pace since 2009. Analysts pointed to a 17.4 percent quarter-on-quarter slump in manufacturing, which makes up about a fifth of the economy, for the disappointing data. Demand for Singapore’s exports, which include oil drilling rigs, pharmaceuticals and semiconductors, has been weakening as the global outlook deteriorates.
“The marine and offshore engineering sector is the weakest cluster of Singapore’s manufacturing sector,” Rajiv Biswas, chief Asia Pacific economist at IHS Global Insight said. “Oil and gas companies have sharply reduced expenditure on oil rigs and offshore support vessels.” This month debt-laden Swiber Holdings, a Singapore-listed company that provides construction services for international oil and gas projects, was placed under judicial management as it implements a rescue plan. Singapore accounts for 70 percent of the global market for jack-up rigs and is a major player in offshore support vessels for the oil and gas industry.
The recent upswing in crude prices to around $50 a barrel-after toying with 13-year lows below $30 in February-is not enough to “to trigger any significant upturn in exploration and development expenditure by the upstream oil and gas industry,” Biswas said. Singapore’s services industry contracted 0.1 percent year-on-year and were down 1.9 percent from the previous quarter. Construction remained a bright spot in the economy, growing 2.5 percent year-on-year and 0.5 percent from the previous quarter as the government ramped up spending. Singapore in August narrowed its full-year economic growth forecast to 1.0-2.0 percent from 1.0-3.0 percent as projected previously. It grew 2.0 percent in 2015. — AFP