The outlook for Singapore’s economy is “cautiously positive”, the government said on Friday, reiterating its growth forecast of 1-3 percent for this year after fourth quarter and 2012 gross domestic product data came in slightly better than expected.
Singapore’s trade-dependent economy grew 1.3 percent in 2012, a touch above the advance estimate of 1.2 percent, the Ministry of Trade and Industry said in a statement. In 2011, the economy grew 5.2 percent.
“The global macroeconomic conditions have stabilized in recent months against the backdrop of improved financial market conditions. Nevertheless, global economic growth is likely to remain subdued,” the ministry said in a statement. “Against this macroeconomic backdrop, the outlook for the Singapore economy remains cautiously positive.”
Ow Foong Pheng, permanent secretary at the ministry, underscored that the outlook was based on no drastic deterioration in the global economy. “Our assessment for Singapore’s growth outlook in 2013 is based on modest fiscal cutbacks in the U.S. and no outright crisis in the eurozone,” he told a news conference.
The 1.5 percent expansion in the fourth quarter from a year ago was led by the services sector, with financial services and business services each growing at 3.3 percent year-on-year.
The ministry said electronics manufacturing contracted in the fourth quarter but the decline was offset by a rebound in the biomedical and transport engineering clusters.
Singapore, a major business and financial center, has been grappling with slowing growth and elevated inflation, posing a dilemma for the central bank which has to balance helping the economy with keeping a lid on price pressures.
Most economists expect the central bank to keep policy tight by continuing to allow a modest and gradual appreciation of the Singapore dollar when it issues its half-yearly monetary policy statement in April, as the job market remains tight due to restrictions on foreign labor.
The country’s central bank uses the exchange rate to control monetary setting, rather than a benchmark interest rate because foreign trade dwarfs domestic demand.
Singapore is likely to unveil more steps to slow an influx of foreign workers in a budget on Monday aimed at placating anger about a surge in immigration blamed for overcrowding, rising prices and competition for jobs and housing.
In a separate statement, International Enterprise Singapore said total trade grew 1.1 percent to S$984.9 billion ($794.8 billion) in 2012, slower than the 8.0 percent growth 2011.
Non-oil domestic exports rose just 0.5 percent last year after growing 2.2 percent in 2011, the government agency said.
It reiterated the 2013 growth forecast for total trade at 3-5 percent and for non-oil domestic exports at 2-4 percent.
Economists polled by Reuters had forecast Q4 GDP growth of 1.2 percent year-on-year and 2.1 percent on an annualized and seasonally adjusted quarter-on-quarter basis.
Singapore, whose trade is around three times GDP, has been badly hit by weakness in Western economies that has crimped demand for many of its exports. Its electronics manufacturers have also failed to tap surging demand for smartphones, unlike rivals in South Korea, Taiwan and China, economists say.
But a majority of economists believe that the worst is over for Singapore’s electronics sector and expect it will no longer be a drag on exports, which have been supported by the strong performance of oil rigs and pharmaceuticals.
The Economic Development Board (EDB), Singapore’s main development agency, remains bullish about prospects for the electronics industry.
“Though Singapore’s electronics/semiconductor industry is currently in a downcycle, we have not seen any major plant closures, and instead in 2012 companies such as Globalfoundries, STATS ChipPAC and Hoya have upgraded or expanded their operations in Singapore,” EDB’s deputy director for electronics Terence Gan told Reuters in a recent interview.
“This shows that Singapore’s manufacturing capacity remains high, and the industry has the ability to ride on the global economic recovery when it happens.”
(Reporting by Kevin Lim, Reuters; Editing by Shri Navaratnam and John O’Callaghan)