World Economy

Singapore Economy Shrinks 4% in 3Q

Growth came in at an anemic 0.6%, the slowest pace since 2009.Growth came in at an anemic 0.6%, the slowest pace since 2009.

Singapore’s export-driven economy shrank the most in four years in the third quarter, officials said, as manufacturing sharply contracted on weaker global demand.

The city-state, which is regarded as a bellwether for Asia’s other trade-reliant economies, has been hit hard by the slump in crude prices and sluggish world growth, which have hurt its key oil and gas services sector, AFP reported.

Its central bank, which uses the exchange rate rather than interest rates to keep prices stable, on Friday maintained its monetary policy of 0% appreciation in the exchange rate for the local currency.

The economy contracted 4.1% in the September quarter from the previous three months, according to preliminary data released by the trade ministry. That compares to analyst expectations for flat growth and comes after a 0.2% increase in the previous three months.

On an annual basis, growth came in at an anemic 0.6%, the slowest pace since 2009.

Analysts pointed to a 17.4% quarter-on-quarter slump in manufacturing, which makes up about a fifth of the economy, for the disappointing data.

Demand for Singapore’s exports, which include oil drilling rigs, pharmaceuticals and semiconductors, has been weakening as the global outlook deteriorates.

“The marine and offshore engineering sector is the weakest cluster of Singapore’s manufacturing sector,” Rajiv Biswas, chief Asia Pacific economist at IHS Global Insight, told AFP.

“Oil and gas companies have sharply reduced expenditure on oil rigs and offshore support vessels,” he said.

This month debt-laden Swiber Holdings, a Singapore-listed company that provides construction services for international oil and gas projects, was placed under judicial management as it implements a rescue plan.

Singapore accounts for 70% of the global market for jack-up rigs and is a major player in offshore support vessels for the oil and gas industry.

The recent upswing in crude prices to around $50 a barrel—after toying with 13-year lows below $30 in February—is not enough “to trigger any significant upturn in exploration and development expenditure by the upstream oil and gas industry,” Biswas said.

Singapore’s services industry contracted 0.1% year-on-year and were down 1.9% from the previous quarter.

Construction remained a bright spot in the economy, growing 2.5% year-on-year and 0.5% from the previous quarter as the government ramped up spending.

Singapore in August narrowed its full-year economic growth forecast to 1.0-2.0% from 1.0-3.0% as projected previously.

It grew 2% in 2015.


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