MTI raises S'pore 2013 growth forecast to 3.5%-4%

SINGAPORE: Singapore has upgraded its economic growth forecast for the year, boosted by growth in the services and manufacturing sectors.

The economy is now expected to grow between 3.5 and 4 per cent, up from an earlier forecast of 2.5 to 3.5 per cent.

Singapore's economic growth picked up pace between July and September.

Third quarter Gross Domestic Product (GDP) rose 5.8 per cent on-year. This is compared to the 4.4 per cent growth in the previous quarter, and higher than advance estimates of a 5.1 per cent growth.



The Ministry of Trade and Industry (MTI) said it expects the economy to maintain a similar pace of growth in the fourth quarter.

Ow Foong Pheng, Permanent Secretary at MTI, said: "Externally-oriented sectors such as manufacturing, transportation and storage are likely to provide support to growth, in line with the gradual pick-up in the global economy.

“Domestically-oriented sectors such as business services are also expected to remain resilient. However, tightness in labour market conditions may weigh on growth in some labour-intensive sectors."

Third quarter GDP growth was broad-based.

Manufacturing grew 5.5 per cent on-year, driven by electronics and transport engineering.

The construction sector expanded 5.3 per cent, while wholesale and retail trade grew 7.9 per cent, boosted by stronger trade flows.

The financial services sector saw growth ease to 10.5 per cent from 13.7 per cent in the previous quarter, while accommodation and food services grew 3 per cent.

The better-than-expected performance prompted an upgrade of Singapore's 2013 growth forecast.

For 2014, the economy is projected to grow by 2 to 4 per cent. But economists say with improving growth, comes higher inflation.

Irvin Seah, senior economist at DBS Bank, said: "COE premiums have already shot back up to pre-tightening levels.

“We expect inflation to cross the 3 per cent in December of this year, or maybe in early next year. And by April next year, there's a good chance that inflation may even challenge the 4 per cent level."

There are also external risks to consider.

Despite the upward revision of full-year GDP growth, MTI said the growth outlook for the Singapore economy remains modest.

This is partly due to ongoing reforms in China, and fiscal consolidation in some ASEAN economies like Indonesia and Malaysia.