Singapore's 4.1% growth in 2013 beats estimates

Year-end surge in manufacturing output propels growth in Q4

By Fiona Chan, The Straits Times, 21 Feb 2014

A SURGE in financial services, coupled with a year-end jump in manufacturing output, powered Singapore's economy to higher-than-expected growth last year.

The economy grew 4.1 per cent for the whole of last year and is projected to expand another 2 per cent to 4 per cent this year, as a global recovery spurs overseas demand.

Local shares rose to a one-month high after the news but slipped again in later trade, with the Straits Times Index closing 0.07 per cent lower.

Last year's economic growth beat initial estimates of 3.7 per cent, the Ministry of Trade and Industry (MTI) said yesterday.

It also sharply hiked its economic growth figures for previous years, to 1.9 per cent from 1.3 per cent for 2012, and to 6 per cent from 5.2 per cent for 2011. It is understood that such revisions are routinely performed as data collection can take up to three years.

For last year, a last-minute burst of factory activity, especially in electronics, propelled economic growth to 5.5 per cent in the fourth quarter from the previous year. This eclipsed flash estimates of 4.4per cent growth.

Economists had expected upgrades to fourth-quarter and full- year growth, but were surprised by the extent. "The broad-based strength indicated in (the numbers) was a positive surprise," said Barclays economist Leong Wai Ho.

All sectors of the economy grew last year, with the financial industry doing particularly well. Finance and insurance services expanded 10.6 per cent, the most since 2010, said Ms Jacqueline Loh, deputy managing director at the Monetary Authority of Singapore at a briefing yesterday. She said the sector was buoyed by firms seeking fresh funding for business expansion plans and by sentiment-sensitive activities, which include stockbroking.

This year, the finance and insurance sector is tipped to continue to register positive growth, albeit at a slight moderation from last year's pace, she added.

The boost from financial services, together with wholesale and retail trade, helped grow the overall services sector - making up two-thirds of Singapore's economy - by 5.3 per cent last year, up from 2 per cent in 2012.

Manufacturing, which accounts for a fifth of the economy, also picked up steam, growing 1.7 per cent last year - higher than its 0.3 per cent growth in 2012.

Construction was the only key sector that bucked the trend. It grew 5.9 per cent last year, down from 8.6 per cent the previous year, amid less building activity in both the public and private sectors.

This year, modest growth is expected for Singapore amid an improving global outlook, said MTI Permanent Secretary Ow Foong Pheng. She said sectors that depend on the global economy, such as manufacturing and wholesale trade, are likely to continue to recover, though risks remain from the ongoing withdrawal of monetary stimulus in the United States and the threat of a sharper-than-expected slowdown in China.

A survey out yesterday showed China's factory activity this month fell to a seven-month low.

The tight labour market here could weigh on growth in some labour-intensive sectors catering to domestic demand, said Ms Ow.

Wage costs are likely to continue rising strongly in the short term, but rental growth may ease as more industrial and commercial buildings are completed, MTI said yesterday. Steady oil prices could bring down utility and transport costs.

But for Mr Andrew Tan, owner of furniture store Atomi, the rise in labour costs is raising not just his staff's wages but the cost of third-party services such as delivery and transport.

"Our third-party costs went up a good 40 per cent last year," he said. He also expects to raise wages by 3 to 7 per cent this year, following hikes last year. "Labour cost pressures are on the high side as locals are expecting a bit more."

Zero productivity growth last year
Firms grappling with restructuring, costs amid moves to lift labour output
By Chia Yan Min, The Straits Times, 21 Feb 2014

THE range of new measures designed to lift labour output fell flat last year with productivity showing zero growth, according to data released yesterday.

While the figures from the quarterly Economic Survey of Singapore 2013 will disappoint policymakers, they are an improvement on 2012, when productivity shrank 2 per cent from 2011.

Productivity has been a key theme in recent Budgets and is expected to feature strongly today, as firms continue to grapple with restructuring and rising costs.

"It takes a while for businesses to restructure, to take on and implement various productivity initiatives, but we see encouraging signs," said Ms Ow Foong Pheng, Permanent Secretary of the Ministry of Trade and Industry (MTI).

Productivity in the manufacturing sector is expected to improve, although "we need to continue to work on" the domestically oriented services industry, she said.

A study by the ministry's economics division, also released yesterday, showed that most sectors became more productive between 2008 and 2013.

However, employment grew faster in the less productive sectors, which dragged down overall productivity growth.

The study concluded that efforts to raise productivity should focus on restructuring the economy towards more productive sectors, instead of only aiming to boost output in each sector.

Sectors with below-average productivity levels, such as construction, business services and accommodation and food services, increased their share of employment between 2008 and 2013.

In particular, a surge in building and infrastructure projects in recent years has led to a substantial expansion of the construction sector.

Over the same period, the more productive sectors such as electronics, transportation and storage, and wholesale and retail trade recorded slower job growth.

The MTI study showed that labour productivity grew by an average of 1.6 per cent each year between 2008 and 2013, higher than the 1.1 per cent in the preceding five years.

The stronger productivity growth came mainly from the biomedical manufacturing, precision engineering, finance and insurance, business services and other services sectors.