Singapore Government Press Release
Media Division, Ministry of Information and The Arts
36th Storey, PSA Building, 460 Alexandra Road, Singapore 119963.
Tel: 3757794/5
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ECONOMIC SURVEY OF SINGAPORE
FIRST QUARTER 1998
Overall Performance
The Singapore economy grew by 5.6 % in the first quarter of 1998. The manufacturing, construction and financial & business services sectors turned in moderately healthy growth on a year-on-year basis. However, the regional economic slowdown has begun to bite, with growth momentum slowing in the first quarter of 1998. Sectoral details are in Table 1.
All sectors showed weaker year-on-year growth, as compared to the previous quarter. Manufacturing output rose by 6.1 %. This was partly due to the low base in the first quarter of 1997, and partly to the strong growth in the chemical and transport equipment industries. The electronics industry grew by 4.6 %, with strong growth in semi-conductors, printers and printed circuit board assemblies.
The financial & business services sector expanded by 6.3 %, down from 9.6 % a quarter earlier. Growth in financial services was dragged down by a slowdown in regional financing and a tapering off in volatility in the foreign exchange markets. Domestic bank lending also moderated. The stock market registered higher turnover. Growth in real estate services has slowed due to the cooling property market while a number of professional services have been affected by the regional slowdown.
The commerce sector saw a significant slowing in growth momentum in the first quarter of 1998 as consumption demand, both external and domestic, moderated. Overall sectoral growth was a sluggish 1.2 % in the first quarter, down from the 3.2 % a quarter earlier. Entrepot trade slowed to 3.7 % while the volume of retail sales fell by 11 %.
Growth in transport and communications moderated to 6.1 %, on the back of the continued slowdown in trade and economic growth in the region. The communications sub-sector however remained healthy, supported mainly by increased competition in the mobile communications segment.
The construction sector continued to turn in double-digit growth of 11 %. Construction activity remained healthy, given the strong pipeline in recent years. Public-sector residential building and civil engineering work supported growth.
Table 1
Gross Domestic Product at 1990 Market Prices
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1997 |
1998 |
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Percentage Change over Same Period of Previous Year |
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1st Qtr |
2nd Qtr |
3rd Qtr |
4th Qtr |
Annual |
1st Qtr |
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Total Manufacturing Construction Commerce Tpt & Comms Fin & Biz Services |
4.2 -5.3 9.5 2.9 8.1 10.6 |
8.5 4.3 12.7 8.1 9.6 11.7 |
10.7 9.8 17.4 9.2 10.9 12.4 |
7.6 7.8 13.2 3.2 8.2 9.6 |
7.8 4.3 13.3 5.8 9.2 11.0 |
5.6 6.1 10.8 1.2 6.1 6.3 |
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Percentage Change over Previous Period (Annualised) |
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Total Manufacturing Construction Commerce Tpt & Comms Fin & Biz Services |
6.4 -7.8 6.5 2.3 12.0 19.6 |
17.0 30.6 25.8 16.9 11.0 11.4 |
6.2 8.7 22.9 0.3 7.0 5.1 |
1.6 3.2 -0.6 -5.3 3.1 3.4 |
7.8 4.3 13.3 5.8 9.2 11.0 |
-1.4 -13.5 -1.6 -5.8 3.6 5.2 |
Source: Department of Statistics, Singapore
Sources of Growth
Total demand expanded by 4 % in the first quarter, down from 8.2 % a quarter earlier. External demand rose by 2.7 %. Growth was registered largely in merchandise trade, while services exports shrank on the back of declines in travel services as visitor arrivals to Singapore slumped.
Total domestic demand rose by 7.1 %. Growth in consumption expenditure slowed to 4.9 %, down from 7.9 % in the previous quarter. Growth in gross fixed capital formation was primarily in construction & works, as well as transport equipment.
Employment And Productivity
In line with the slowing economy, the labour market eased further in the first quarter. The seasonally adjusted unemployment rate in March 1998 rose to 2.2 %, up from 2 % in December. There was a net increase of 17,100 jobs, significantly lower than the 35,800 jobs in the preceding quarter. About half of the employment gains came from construction (8,500). The financial & business services, manufacturing, and transport & communications sectors contributed 4,000, 700 and 500 jobs respectively. However, the commerce sector registered a decline of 2,800 jobs as both external and domestic demand was affected by the regional crisis. The remaining sectors contributed a total gain of 6,200 jobs.
A survey of private sector establishments with at least 25 employees showed that around 7,000 workers were retrenched in the first quarter. The majority was from the manufacturing sector (74 %) while services sectors accounted for the rest.
With the slowdown in economic activity, productivity growth fell across all sectors. Overall labour productivity declined by 0.3 % in the first quarter, down from the 1 % growth in the preceding quarter.
Business Costs And Inflation
The Unit Labour Cost (ULC) of the overall economy rose by 1.8 %, compared with an increase of 4.3 % in the same period last year. Manufacturing business costs moderated further due to healthy productivity growth in the sector. The Unit Business Cost (UBC) index and ULC index of the manufacturing sector fell by 0.4 % and 3.1 % respectively.
Inflationary pressures trended down as weaker consumer sentiment saw downward price pressures. The Consumer Price Index (CPI) for the first quarter was a modest 1.1 %, down from 2.3 % a quarter earlier. The bulk of price increases were in housing costs, food prices, education and health care costs.
% change in CPI (Year-on-Year)
1997 Q1 1.7
1997 Q2 1.8
1997 Q3 2.3
1997 Q4 2.3
1998 Q1 1.1
Investment Commitments
Investment commitments in the manufacturing sector reached $2 billion in the first quarter of 1998. Foreign commitments made up three-quarters of the total. The US contributed the largest share of $841 million, followed by Japan and Europe with $496 million and $186 million respectively. The bulk of US investments were committed in both new and expansion projects in the electronics and chemical industries.
Investment commitments in business services in the first quarter amounted to $449 million in terms of total business spending. Foreign capital accounted for two-thirds of the investments, mainly from European investors.
External Trade
Singapore’s trade growth moderated in the first quarter of 1998 due to the effects of the regional economic crisis, as well as signs of some moderation in electronics demand. Total exports increased by 9.9 % to reach $46.3 billion in the first quarter. Domestic exports increased by 6.7 % while re-exports grew by 14 %.
Non-oil domestic exports grew by 11 %. The top 5 markets, viz., the US, EU, Malaysia, Hong Kong and Japan, continued to account for about 75 % of total non-oil domestic exports in the first quarter. Developed-country markets remained healthy.
Balance of Payments
Singapore’s current account surplus was $4.6 billion in the first quarter of 1998, compared with $4.8 billion in the preceding quarter. The services balance slipped into deficit, reflecting the effects of the economic slowdown in the region. Nonetheless, the surplus on the goods account rose as merchandise exports to industrial countries maintained healthy growth. Under the capital and financial accounts, there was a net outflow of bank funds of $8 billion, due mainly to a reduction in bank liabilities to head offices and branches.
Business Expectations
Business sentiments are mixed. Compared with a quarter ago, business sentiment within commerce and services sectors has weakened across the board. Industrialists are generally cautious, with most expecting unchanged conditions, and a handful in selected electronics segments expecting better business, given the cushion from the US and European markets. This is reflected in the slightly positive net weighted balance of 2 % of industrialists who expect an improvement in business conditions over the next 6 months. Sentiments are slightly more favourable than those a quarter earlier when a net weighted balance of -13 % expected a deterioration in conditions.
The commerce and services sectors are generally bearish about business prospects in the next 6 months, largely due to the regional economic downturn and weak domestic demand. A net balance of 34 % of business firms in the commerce sector expects slower business for the next 6 months. A majority of transport and storage businessmen was pessimistic, with a negative balance of 55 %. Within business services, sentiment has deteriorated, with a negative balance of 35 %. However, sentiment within the real estate industry has improved slightly, with a net balance of –15 %. Financial services firms also expect poorer business prospects, with a balance of –27 %.
Conclusion
The outlook for the external economic environment remains mixed. In the US, the outlook improved further, following stronger-than-expected growth in the first quarter. Economic recovery in the EU is also expected to continue. In Asia, however, the 1998 growth outlook for a few economies, particularly Indonesia, Thailand and South Korea, was revised downwards as the economic turmoil runs its course. There were also signs of a substantial slowdown in Japan, but it is likely to be ameliorated to some extent by the recently announced fiscal stimulus.
The Singapore economy will continue to be shaped by the disparate growth performance in the Asian, US and EU economies. Sectors highly exposed to regional and domestic demand will continue to slow while those exporting to the US and EU will be supported by healthy growth in these economies. Hence, hub services like transport and financial services are expected to slow down further. Segments in the commerce sector like retail, restaurants and hotels will similarly be affected by the decline in visitor arrivals and weaker consumer sentiments. However, manufacturing is likely to remain generally healthy due to strong growth in the US and EU. Construction will be supported by public sector projects awarded over the past two years. The communications industry is also likely to continue enjoying healthy growth.
Overall, economic growth will weaken further during the year as the impact of the regional economic turmoil filters through the economy. There remains much uncertainty over the regional political and economic situation. The Ministry of Trade and Industry has retained its 1998 economic growth forecast of 2.5-4.5 %. However, this assumes no major deterioration in the external environment.
Sale of the QES
Copies of the Survey will be available from 2 p.m. on 18 May 1998 at the Singapore National Printers retail outlets at $13.39 a copy.
MINISTRY OF TRADE AND INDUSTRY
18 MAY 1998