Singapore Q3 GDP growth quickest in almost four years, raises tightening prospects

SINGAPORE (Reuters) - Singapore’s economy grew at its quickest pace in nearly four years in the third quarter, thanks to a boom in manufacturing that some analysts say will encourage tighter monetary policy next year.

Office workers walk to the train station during evening rush hour in the financial district of Singapore March 9, 2015. REUTERS/Edgar Su/Files

Thursday’s revised official numbers beat the market’s already buoyant expectations, and prompted the government to upgrade its full year 2017 growth estimate to 3.0 to 3.5 percent on the back of improved global demand.

Gross domestic product expanded by 5.2 percent in July-September from a year earlier versus economists’ forecast of 5.0 percent growth, the Ministry of Trade and Industry (MTI) said in a statement. An initial estimate showed growth of 4.6 percent.

It marked the strongest year-on-year growth since the fourth quarter of 2013 and firmed some economists’ expectations for monetary tightening as soon as the central bank’s next meeting in April.

“Singapore’s strong growth recovery reflects regional trends of trade-exposed countries...capitalizing on the rise of global demand to boost growth,” said Trinh Nguyen, senior economist for Natixis in Hong Kong.

Nguyen expects the robust growth will probably allow the Monetary Authority of Singapore to tighten its exchange-rate based policy in April.

Indeed, at its October review, MAS changed a reference to maintaining current settings for an extended period in a sign it could tighten next year.

On an annualised and seasonally adjusted basis, the economy grew 8.8 percent from the previous quarter, beating an initial estimate of 6.3 percent and economists’ forecasts of a revision up to 7.4 percent.

Not everyone was convinced about a tightening next year and the deputy managing director at the MAS, Jacqueline Loh, gave little away when asked about the implications for policy from Thursday’s data.

“The forecast for core and headline CPI are unchanged. Accordingly, the monetary policy stance announced in October remains appropriate,” she said.

Data due at 0500 GMT is expected to show the MAS’ core inflation measure holding steady at 1.5 percent in October.


The MTI revised up its GDP growth forecast for the whole of 2017 to 3.0 to 3.5 percent, from the previous projection of 2.0 to 3.0 percent gains. Growth in 2018 is expected to be 1.5 to 3.5 percent, the MTI said.

The data showed the lift to growth came from a broad expansion in manufacturing activity, up a sharp 34.6 percent on the quarter, compared to 4.0 percent growth in the second quarter.

Singapore and other trade-reliant economies in Asia have enjoyed a boost this year from an improvement in global demand, particularly for electronics products and components such as semiconductors.

Annual third-quarter growth for other Southeast Asian peers including Thailand, the Philippines and Malaysia beat expectations.

Loh Khum Yean, MTI Permanent Secretary told reporters there “remains unevenness between sectors and within sectors,” adding that the construction sector and segments within the manufacturing sector such as transport engineering remain weak.

Nomura’s Brian Tan took a cautious view about the economic and monetary policy outlooks.

“The headline GDP numbers will be lifted up by electronics manufacturing but the real question is what about the rest of the economy?,” said Tan.

“If that doesn’t improve sufficiently by the time we get into next year then it’s very difficult to see them (MAS) tightening policy just yet.”

Reporting by Masayuki Kitano and Fathin Ungku; Additional reporting by John Geddie; Editing by Shri Navaratnam