Despite strong real gross domestic product (GDP) growth during the fourth quarter, Singapore’s economy remains fragile with 2015 representing the weakest year for growth since 2009, according to Wells Fargo Economics Group. While GDP increased by 5.7% in the final quarter of 2015, Singapore’s real GDP only grew by 2% on a year-over-year basis.
The country’s manufacturing sector impacted overall economic growth, with output contracting for the third straight quarter. “Weakness in industrial output primarily reflects Singapore’s exposure to the slowdown in global growth and trade activity, as much of the country’s manufactured output is ultimately exported,” the Jan. 4 report states.
Construction output recovered after contracting in the third quarter, but only increased 2.2% from last year. The service sector, however, is stable and increased 3.2% from a year earlier. “The relative resilience in service sector output despite contraction in manufacturing activity is an encouraging development, and one that has been echoed in several other large economies, particularly in China and the United States,” according to Wells Fargo.
Overall consumer price index (CPI) is negative and slow growth over the past year has given way to an absence of inflationary pressures in Singapore’s economy. This gives the Monetary Authority of Singapore the ability to reduce its target pace of appreciation for the country’s currency. “Relative to the U.S. dollar, the Singapore dollar has actually depreciated roughly 7% over the same time period,” reads the report. “With the Federal Reserve expected to continue increasing the federal funds rate in the coming quarters, [we] expect the Singapore dollar to see gradual declines vis-à-vis the greenback in the year ahead.”
- Jennifer Lehman, NACM marketing and communications associate