Singapore’s economy witnessed an unexpected expansion in the quarter ending June 2014 with annualized GDP growth touching 0.1 percent as opposed to the consensus view of a contraction of 0.3 percent. The July estimate for Singapore predicted a contraction of 0.8 percent.
Manufacturing was not as badly hit as widely anticipated and received a boost from the speeding recoveries of the economies of other developed countries. The Trade Ministry stated that the global economic recovery helped the economy expand despite a weak first quarter.
Singapore is a highly dependent on experts and recovery in global demand will help businesses manage rising costs. The government is doing its bit by discouraging inflow of foreign workers, implementing steps to boost productivity, and attracting new industries into the country. The US recovery, the pro-growth monetary policy of the EU, and China’s support for the expansion, according to the Trade Ministry, helped Singapore put up an improved show.
CIMB Researh economists predicted a GDP growth of 3 percent even as there were murmurs about the uneven labor productivity as seen from the data. The general consensus is that a lot more work needs to be done to put the Singapore economy back on trakc.
Amongst the various components of the economy, manufacturing contracted by 15.2 percent while services and construction expanded by 4.5 percent and 0.3 percent respectively. While 2014 forecast by authorities continue to hover between 2.5 to 3.5 percent, non-oil exports estimates that predicated an expansion of 1-3 percent were revised to indicate a contraction of 1-2 percent.
The Central Bank remained committed to steady but modest appreciation of the island’s dollar currency. However pricing pressure may arise due to labor constraints that may complicate matters and contribute to slower growth in labor-intensive sectors like retail and food services. On the whole, the overall sentiment remains pessimistic due to high risk of global shocks arising out of geopolitical risks.