Singapore GDP contracted in Third Quarter

Based on advance estimates, Singapore Gross Domestic Product (GDP) contracted 1.5% in the third quarter on a quarter-on-quarter seasonally-adjusted annualised basis. This came about because of contraction in manufacturing and construction sectors (-3.9% in case of manufacturing and -7.5% in case of construction).

I did not expect that construction to do poorly compared to manufacturing. This was under the radar as news leading to official release of estimates only pointed towards weaknesses in manufacturing, such as the electronic sub-sector. The reason for construction under-performance was due to decline in private sector building activities. (Source: Press Release statement by MTI) The reason came as a surprise too.

As for second quarter, construction activities were revised upward from 0.9% growth to 14.3% growth. That is a significant upward revision that resulted in positive growth in second quarter GDP (on quarter-on-quarter basis) of 0.2% instead of earlier figure of contraction of 0.7%. Hence, Singapore avoided a technical recession (defined as two consecutive quarter of contractions) as most economists had predicted.

Looking at quarter-on-quarter GDP growth numbers starting from third quarter 2011 to third quarter 2012 (+ 2.0%, – 2.5%, + 9.8%, + 0.2%, – 1.5%), Singapore economies slowed since the start of April. I think because of a strong first quarter, the Ministry of Trade and Industry was confident that economy is on track to grow at 1.5% to 2.5% for whole of this year. This is a particularly weak performance forecast for this year when compared with 4.9% GDP actual growth rate in 2011.

Another surprise is that the Monetary Authority of Singapore (MAS) has maintained the same monetary policy set in April 2012 in this October review. Their focus is to contain inflationary pressures and keeping economy on a path of restructuring towards sustainable growth.

“MAS will therefore maintain the policy of a modest and gradual appreciation of the S$NEER policy band.  There will be no change to the slope and width of the policy band, as well as the level at which it is centred.“ (Source: MAS Monetary Policy Statement)

There is no loosening of monetary policy as a result of sticking to the same April policy. How did foreign currencies performed against Singapore dollar? See exchange rates below and percentage changes as at 8.24 pm, since the announcement of MAS statement in the morning:

USD/SGD      1.221  – 0.66% (US dollar)
AUD/SGD     1.251  – 0.81% (Australian dollar)
GBP/SGD      1.963  – 0.44% (British Pound)
EUR/SGD       1.584  – 0.30% (Euro)
YEN/SGD      0.016  – 0.67% (Japanese Yen)
CNY/SGD     0.195  – 0.48% (Chinese Yuan)
CHF/SGD      1.310  – 0.35% (Swiss Franc)

Singapore dollar strengthened against all currencies within today.

Copyright © 2012, limkimtong for Living Investment

The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.

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