SINGAPORE REGISTERS SOLID Q1 GROWTH

Steady growth and inflation comfortably within target to support central bank’s plans to tighten monetary policy this year

SINGAPORE’S economy remained on solid footing in the first quarter, with the government expressing more certainty of a steady pace this year as global trade risks and tightening financial conditions allow for a patient monetary policy.

Gross domestic product (GDP) rose at a seasonally adjusted, annualised rate of 1.7 per cent from the prior three months, said the trade ministry yesterday, in line with the median estimate

The rate of expansion from a year earlier gave the trade ministry enough confidence to narrow its growth forecast for this year to between 2.5 and 3.5 per cent, from a prior range of between 1.5 and 3.5 per cent.

Manufacturing showed particular strength while construction expanded on an annual basis for the first time in a year.

Steady growth that’s within the government’s forecast range, coupled with data earlier this week showing inflation comfortably within target, should support the central bank’s plans to gradually tighten monetary policy this year.

The government remains on guard for negative effects stemming from United States-China trade tensions and a global trend of rising interest rates.

A surge in electronics demand underpinned the city state’s 3.6 per cent expansion last year, but as the export boom starts to moderate, GDP growth is set to ease to a more sustainable pace.

The trade ministry expects growth to broaden out to other sectors of the economy this year, even as construction continues to lag. Solid growth in electronics and precision engineering clusters, although more moderate this year, would help sustain manufacturing, it said.

While growth had been concentrated in export-related industries, it was expected to broaden out to domestic-focused sectors this year, such as retail and food services, as the labour market improved, said the ministry.

Construction would probably remain lacklustre, it said, “as the earlier weakness in construction demand, particularly from the private sector, is expected to continue to weigh on construction activities this year”.

Compared with a year ago, construction fell five per cent in the first quarter, after contracting 8.4 per cent for the whole of last year. Manufacturing climbed 9.8 per cent in the first quarter, while the financial services industry surged 9.1 per cent.

Rising trade tensions between the US and China is among the biggest risks to global growth and export-reliant Singapore.

In addition, the ministry said the threat to emerging markets from rising US interest rates was a key downside risk.