Singapore economy grew 2% in 2015, slowest since 2009

2% growth last year, with gloomy outlook for 2016
MTI warns of manufacturing woes, growing global risks, and expects lower wage growth
By Chia Yan Min, Economics Correspondent, The Straits Times, 25 Feb 2016

The Singapore economy grew at a modest pace last year, but things could take a turn for the worse this year, with an increasingly bleak outlook.

Risks to growth are rising, with the global economic outlook growing gloomier since the start of the year, the Ministry of Trade and Industry (MTI) said yesterday.

MTI also warned that the solid wage growth enjoyed by Singaporeans last year is unlikely to be repeated this year, with the tight labour market likely to see some slackening ahead.

Last year, the economy grew a modest 2 per cent, the weakest rate of growth since 2009, and down from 2014's 3.3 per cent expansion, data from MTI showed yesterday.

The economy expanded at just 1.8 per cent in the last three months of last year, lower than the previous estimate of 2 per cent, as the manufacturing sector contracted further.

Growth this year is likely to stay within the 1 per cent to 3 per cent range, said MTI.

The sober message from MTI prompted several private sector economists to cut their forecasts for this year.

Bank of America Merrill Lynch economist Chua Hak Bin has lowered his estimate for full-year growth to 1.5 per cent, from 2 per cent, "given the more challenging and volatile economic conditions".

But other economists, such as UOB's Mr Francis Tan, said that the economy is unlikely to enter a recession this year.

Speaking at a press briefing yesterday, MTI permanent secretary Ow Foong Pheng warned that global growth this year is expected to be "only marginally better than 2015".

The slowdown in China, combined with Chinese and US companies turning away from imports, is likely to result in further pain for Singapore manufacturers, said Mrs Ow.

Lower oil prices have also hit rig-builders in the marine and offshore segment.

Global risks are also mounting - China's economy might slow more than expected amid ongoing reforms, while the short-term outlook for the rest of the region remains less than upbeat.

"With sustained low commodity prices and the beginning of the normalisation of US monetary conditions, regional countries could face sudden and large capital outflows, resulting in added pressures on their currencies and asset markets," said Mrs Ow.

The outlook for the construction sector has also dimmed due to a decline in contracts awarded last year, amid sluggish private sector building activity. The labour-intensive service sector, meanwhile, has been weighed down by manpower constraints, said Mrs Ow.

Barclays economist Leong Wai Ho, who cut his forecast for 2016 growth from 2.5 per cent to 1.5 per cent, said the economic outlook is "not improving anytime soon".

"It is a matter of time before the Government acknowledges that it needs to do something to provide short-term relief," he said.

MTI announced this morning that Singapore’s economy grew by 2.0 per cent in 2015. On a year-on-year basis, GDP grew by...
Posted by Ministry of Trade & Industry on Tuesday, February 23, 2016

Slowdown heightens concerns over Singapore's long-term economic challenges
Policymakers have to convince Singaporeans the future will be brighter for their children despite modest growth rates
By Aaron Low, Deputy Business Editor, The Straits Times, 25 Feb 2016

Over the Chinese New Year, I caught up with a cousin of mine.

Instead of the usual loud jokes he likes to make, the first thing he said to me was: "Things are bad."

He expects to be retrenched this year from the multinational company he works for, and his only solace is that he will have a generous package to help him tide over some of the months ahead.

It was not pleasant chatter and some of this gloomy conversation was echoed in the Ministry of Trade and Industry's (MTI) outlook for growth this year.

The global economic outlook has darkened since the start of the year, which saw wild swings in the financial markets and even scarier falls in commodity prices.

In turn, risks to global growth have risen, said MTI permanent secretary Ow Foong Pheng.

China could experience even slower growth than previously anticipated, while the sharp falls in commodity prices may lead to massive outflows of capital from regional countries.

And to drive the message home, Mrs Ow also said that the solid rise in median wages last year - 7 per cent for Singaporeans - is unlikely to be repeated this year.

Given "the challenging near-term outlook for the Singapore economy, labour demand may be more subdued this year, thereby leading to more moderate wage growth", she said.

There is no doubt that we will be in for a rough ride this year.

Most indicators point to a further slowdown in the global economy. If it does turn out that way, Singapore will not be spared.

Some economists such as Barclays Capital's Leong Wai Ho have already started to suggest that the Government should roll out measures to help companies cope with the pain at the upcoming Budget.

But Finance Minister Heng Swee Keat is unlikely to be able to do much, given that he has little wiggle room.

The March 24 Budget is the Government's first this term, and there are no extra funds in the war chest as its surpluses have been locked up as "past reserves" after its previous term ended.

But what is even more important than simply dealing with the cyclical downturn is to address the long-term structural challenges Singapore faces.

An ageing population and finite land resources have set the parameters for growth firmly in place. For Singapore's mature economy, growth rates of between 1 per cent and 3 per cent - what we will see this year - are pretty much what we should expect to see for the long term.

The question for policymakers is how to reframe these parameters so that Singaporean workers and firms can continue to believe in a brighter future.

A part of the solution is to push ahead with economic reforms such as the ambitious SkillsFuture or developing local firms so they can take off overseas.

Another, arguably more critical, part is to convince Singaporeans that the future will be better for their children.

This will take more than numbers, or policy arguments. It will take a vision of where we will go from here.

Hopefully, the vision will become clearer come March 24, when the Budget is delivered.

Expect more moderate wage growth in 2016: MTI
By Chia Yan Min, Economics Correspondent, The Straits Times, 25 Feb 2016

The strong wage growth that workers enjoyed last year might not be sustainable, given the lacklustre economic outlook and Singapore's flagging labour productivity.

Ministry of Trade and Industry permanent secretary Ow Foong Phengsaid at a press briefing yesterday that demand for labour may be more subdued this year, given the "challenging near-term outlook for the Singapore economy".

This is likely to lead to more moderate wage growth.

Real median income for full- time employed residents, which include both Singaporeans and permanent residents, grew 5.3 per cent last year, significantly faster than the 0.7 per cent growth registered in 2014. Real median wages for Singaporeans rose 7 per cent last year.

This was due to manpower shortages in some industries as well as increases in employer Central Provident Fund contributions, which went up 1 percentage point for all workers on Jan 1 last year.

Besides the depressed growth outlook, last year's strong wage increases might not continue because productivity growth has been poor.

A study released by MTI yesterday showed that the real average wage growth of resident workers outpaced labour productivity from 2005 to last year.

Labour productivity grew at an average annual rate of 0.5 per cent from 2005 to last year, while the real average monthly earnings of resident workers increased by 1 per cent a year over the same period.

If real wage growth continues to outpace productivity gains, Singapore's competitiveness will be hit, said Mrs Ow.

"In order for our economy to remain competitive and wage growth to be sustainable, wages should grow in tandem with productivity over the longer term."

Manufacturing to remain key pillar of economy: MTI
By Marissa Lee, The Straits Times, 25 Feb 2016

Manufacturers suffered a torrid 2015 that dragged down economic growth to a six-year low - and their pain is unlikely to ease this year.

However, the Ministry of Trade and Industry (MTI) maintained yesterday that the sector will remain a key pillar of Singapore's economy.

"The manufacturing sector continues to be important in our view to the Singapore economy for various reasons, essentially for a diversified economic structure," Mrs Ow Foong Pheng, MTI permanent secretary, told reporters.

After posting deeper and deeper contractions each quarter last year, the manufacturing sector shrank by 5.2 per cent for all of 2015, reversing the 2.7 per cent growth in 2014.

Nearly half of the decline came from the transport engineering cluster, which built fewer oil rigs than it did in 2014 as dramatically lower oil prices crimped demand. Chemicals was the only cluster to post higher output in 2015 from a year earlier.

The outlook for manufacturing may be weak, Mrs Ow said, but foreign investors have still found the sector attractive. Manufacturing pulled in $8.3 billion in fixed asset investment commitments last year, up from $6.8 billion in 2014, noted MTI.

And while manufacturing's share of the economy has shrunk from 27.8 per cent of nominal gross domestic product in 2005 to 21.4 per cent in 2010, and just 19.8 per cent last year, the figure appears to be stabilising.

MTI pointed out the sector's GDP share has risen over the past two years, from 18.5 per cent in 2013.

"We are making significant moves to ensure that we remain relevant for the future," said Mrs Ow, adding that MTI is focused on growing advanced manufacturing and manufacturing-related services.

In 2013, the Economic Development Board said it would devote $500 million over the next five years to grow the "future of manufacturing". Mrs Ow said: "We are not changing course on that. We continue to make moves to sustain this on various fronts."

One trend that MTI highlighted was the rise of "factoryless" goods-producing companies such as fabless semiconductor firms. They could be involved in research and development or chip design, but outsource production to an overseas foundry instead of doing it themselves.

Such companies are recorded under the manufacturing umbrella if they own their material inputs, and under the service sector if they do not. This makes it difficult to track their contribution to GDP, said MTI economics director Yong Yik Wei.

"Our sense is that it is probably still quite small... but it is a trend that we think will grow," she said.

In 2015, SPRING Singapore supported twice the number of enterprises and start-ups compared to 2014, helping them press...
Posted by SPRING Singapore on Friday, February 26, 2016

Inflation forecast cut amid weak oil and COE prices
But economists do not expect MAS to further slow Singdollar's appreciation
By Chia Yan Min, Economics Correspondent, The Straits Times, 24 Feb 2016

Singapore's central bank has cut its inflation forecast for the year amid a historic rout in global oil prices and sliding certificate of entitlement (COE) premiums.

The move came as new data showed Singapore had its 15th straight month of negative inflation last month - the longest spell of sliding prices in almost four decades.

Sluggish inflation is hitting economies worldwide, with the potential to lead to economic stagnation.

The consumer price index, a measure of headline, or overall, inflation, fell 0.6 per cent here in January from the same month a year earlier.

However, the Monetary Authority of Singapore (MAS) kept forecasts for another key measure, core inflation, unchanged - a sign it is likely to maintain its Singapore dollar policy when it meets in April unless the outlook worsens, economists said.

The core inflation strips out accommodation and private road transport costs to better gauge everyday expenses.

MAS now expects overall inflation to come in between negative 1 per cent and zero for the whole of this year, down from an earlier forecast of negative 0.5 per cent to 0.5 per cent.

This follows a "significant step- down in global oil prices in recent months", MAS and the Ministry of Trade and Industry (MTI) said in a joint statement yesterday.

Car COE premiums also fell sharply at the start of the year, by about $2,500 - or about 4 per cent - on average over the first four bidding exercises this year.

MAS left its core inflation forecast for this year unchanged at 0.5 per cent to 1.5 per cent, as oil-related items make up a smaller share of the core inflation basket.

With global oil prices expected to rise gradually in the second half of the year, the drag from oil-related items on core inflation is likely to become smaller towards the year end, said MAS and MTI.

This means core inflation is expected to pick up gradually over the year, especially as the price-dampening effects of one-off Budget measures fade. These include medical subsidies and the abolition of national exam fees for Singaporeans.

Officials also noted that domestic wages are set to keep rising this year, but more slowly than last year.

Despite a weak inflation and growth outlook, most economists do not expect MAS to ease monetary policy at its April meeting unless oil prices sink further or Singapore's economy takes a sharp turn for the worse.

OCBC economist Selena Ling said it would be premature to expect MAS to further slow the Sing- dollar's appreciation against a trade-weighted basket of currencies, as the central bank still expects core inflation to rise later in the year.

But MAS might "interpret lower COE premiums as partly a symptom of underlying demand weakness" and a sign growth could slow further, said Citi economist Kit Wei Zheng.

Growth and inflation data in the coming months, as well as labour market developments and the Budget on March 24, will paint a clearer picture of the central bank's intentions in April, he said.

Tourism spending down for first time in six years
By Melissa Lin, The Straits Times, 1 Mar 2016

The amount spent by tourists in Singapore fell last year for the first time in six years, amid an uncertain economic outlook and the tightening of business travellers' budgets.

While the number of visitors rose 0.9 per cent to 15.2 million, their overall spending fell 6.8 per cent to $22 billion for the full year, preliminary estimates by the Singapore Tourism Board (STB) show.

This was the first decline in tourism receipts since 2009 in the wake of the global financial crisis from 2007 to 2008, and the lowest since 2010's $18.9 billion.

Fewer business travellers and their lower spending per person was the main reason for the slump, STB said yesterday at a media conference where it reviewed its performance for the past year.

Companies' tighter travel budgets had a significant impact on tourism receipts because the spending of business travellers - who make up about a quarter of total visitors to Singapore - tends to be twice that of leisure travellers, said STB chief executive Lionel Yeo.

Between January and September last year, visitors spent less on shopping, accommodation, transport, sightseeing and casino gaming than they did over the same period in 2014. Spending on food and beverage rose slightly, by 1 per cent.

Mr Yeo said STB was concerned about the headwinds facing the industry. "We take heart at the fact that we are still attractive as a leisure destination... but there are some factors that are beyond our control, including the strength of the Singdollar," he added.

STB figures show Singapore's Jubilee year attracted 2 per cent more leisure tourists, particularly from China and India.

But visitor numbers from Singapore's two closest neighbours, Malaysia and Indonesia, fell 5 per cent and 10 per cent, respectively, as the ringgit and rupiah depreciated against the Singdollar.

Nevertheless, Indonesia remained the Republic's top source of visitors, followed by China, Malaysia, Australia and India.

There were bright spots in the cruise and business events sectors. Cruise passenger throughput rose 14 per cent to one million last year. STB last year supported more than 350 business events, which saw a 27 per cent year-on-year growth.

The Singapore Tourism Board (STB) announced at its annual year-in-review press briefing today that visitor arrivals for...
Posted by Ministry of Trade & Industry on Monday, February 29, 2016

For this year, STB forecasts tourism receipts to grow by zero to 2 per cent to be in the range of $22 billion to $22.4 billion. Visitor arrivals are expected to be between 15.2 million and 15.7 million, a growth of zero to 3 per cent.

The "slightly more upbeat" forecasts suggest there are still pockets of growth, for instance, in cruise arrivals and the expansion of low-cost carriers taking advantage of low oil prices, said Ms Selena Ling, OCBC Bank's head of treasury research and strategy.

Ngee Ann Polytechnic's senior tourism lecturer Michael Chiam said STB should continue to explore new markets, and figure out how to better position Singapore's heritage and culture. "What story do we want to tell? It's something for everyone to think about. STB alone can't do everything."

Singapore Inc takes a beating in difficult 2015
Total profit of 332 companies that have posted results down 18% to $25.6b
By Wong Wei Han, The Straits Times, 1 Mar 2016

Singapore's corporate sector took a significant profit hit in a tumultuous 2015, with the business environment beset by domestic constraints, the plunging oil price and global economic slowdown.

By yesterday afternoon, 332 listed companies had reported a combined profit of $25.58 billion for the full year ended Dec 31. This was 17.6 per cent lower than in 2014.

A total of 240 companies have so far posted profits for 2015, and fewer than half of these - 104 - managed to grow their profits last year, compared with 2014. Annual profits for a further 107 companies were down year on year.

A total of 92 listed companies were hit by net losses last year. Among them, 17 companies saw their losses widen from a year earlier, while a total of 57 companies went from recording a profit in 2014 to suffering a loss in 2015.

The tally so far reveals the challenging conditions of last year and an uneven outlook in 2016, OCBC economist Selena Ling told The Straits Times.

"Banks were able to benefit from better interest margins but, elsewhere, manufacturing did poorly due to slowing external demand, the property sector was in the doldrums because of the cooling measures, and the oil and gas sector made news for all the wrong reasons," Ms Ling said.

"This year, China remains a huge uncertainty for Singapore companies, not so much because of the headline growth but more for the policy-induced volatility. As for the oil and gas related sector, notice how all the talk of production cut has come up empty, and I expect still stormy waters ahead."

Singapore banks were again the top three most profitable listed companies, with DBS Group taking the top spot after its 2015 profit grew 10.1 per cent to $4.45 billion. OCBC was in second place with a $3.9 billion profit, up 1.6 per cent, followed by United Overseas Bank in third spot even as its full-year profit slipped 1.2 per cent year-on-year to $3.21 billion.

But the evergreen sector was not without vulnerability. The trio's loan book exposure to China and the oil and gas sector will persist if not deteriorate this year, and heavy provisions for the soured accounts will likely erode their earnings.

The oil price woes had a more direct impact on Keppel Corp and Sembcorp Industries, both with substantial rigmaking businesses.

Keppel Corp still posted $1.52 billion in profit last year - the fourth most profitable firm here - but that was 19.1 per cent lower than a year earlier. Sembcorp Industries' profit sank 31.5 per cent year on year to $548.9 million as its offshore marine unit and one of 2015's worst performers, Sembcorp Marine, suffered a $289.7 million net loss.

Property giant CapitaLand reported $1.07 billion in net profit, down 8.2 per cent from 2014. Net profit for rival City Developments grew 0.5 per cent to $773.4 million.

Industry watchers, including CDL chief executive Kwek Leng Beng, are hopeful the Government will unwind some property cooling measures this year. But the Monetary Authority of Singapore has repeatedly noted that the timing is not yet ripe for such a move.

At the other end of the spectrum, Noble Group led the loss-making firms with a $2.36 billion net loss in 2015 - a steep fall from 2014's $186.6 million profit. Weak commodity prices and asset impairments have been crippling for the company, which had its credit rating further cut by Standard & Poor's yesterday.

Several other energy and offshore marine players also ended 2015 with major losses, including Cosco, RH PetroGas, KS Energy and Pacc Offshore Services.

Cosco suffered a $570 million loss last year, from a $20.9 million profit in 2014, while RH PetroGas saw its annual loss widen from 2014's $39.9 million to $241.4 million in 2015.

Despite the choppy corporate landscape this year, there is some upside, Ms Ling said.

"One bright spot is the growth in the United States. The data hasn't been fantastic but it offers some encouraging signs.

"I think we can also expect the Government (to shift) its Budget focus back to economic growth with support measures for the corporate sector, particularly the small and medium enterprises."