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Singapore Q2 2016 GDP rises 2.2% year-on-year


Brexit poses downside risks to Singapore GDP growth in 2017

By Rajiv Biswas, Asia Pacific Chief Economist, IHS Markit Global Insight 

Key Points:

  • The advance estimate of Singapore’s GDP for Q2 2016 was up 2.2% year-on-year (y/y), helped by moderate expansion in manufacturing, construction and services.
  • Singapore’s manufacturing sector recorded positive growth of 0.8% y/y in Q2 2016, after five successive quarters of negative growth. Positive growth in the manufacturing sector has been supported by expansion in the biomedical manufacturing sector as well as electronics, which has helped to mitigate the negative impact of slumping output in the marine and offshore engineering cluster.
  • The near-term outlook for the Singapore economy has improved according to the Purchasing Managers’ Index leading indicator, with the Nikkei Singapore PMIproduced by IHS Markit rising to a five-month high in June, as Singaporean private sector firms saw a stronger improvement in overall operating conditions in June, with output rising at a sharper rate as total new orders returned to growth.
  • To accommodate increased production schedules, companies expanded their purchasing activity for the first time since February.The Nikkei Singapore PMIposted 52.3 in June, up from 50.1 in May, signaling a second successive monthly improvement in the health of Singapore’s private sector.
  • After three quarters of rapid growth in the construction sector, the pace of expansion moderated to 0.6% y/y, due to a slowdown in private sector construction activity. However compared to a year ago, construction GDP still showed growth of 2.7%.
  • The services sector continued to show moderate expansion of 1.7% y/y, led by growth in the wholesale and retail trade sector as well as the transport services and storage sector. According to the data from the Economic Development Board of Singapore, output of the transport engineering cluster decreased by 18.3% in the first five months of 2016, compared to the same period last year.

IHS Markit Global Insight Views:

IHS Markit Global Insight forecasts that Singapore GDP growth will moderate from 2.0% in 2015 to 1.7% in 2016. Given the backdrop of China’s economic slowdown and the negative effects of slumping oil prices on Singapore’s marine and offshore engineering sector, Brexit will add to global financial markets uncertainty, creating another downside risk to the APAC and Singapore’s growth outlook for 2017. With the EU accounting for around 8.2% of Singapore’s total exports, any significant slowdown in the UK and EU GDP growth in 2017 due to Brexit and wider banking sector problems in the EU are expected to dampen Singapore’s GDP growth outlook for 2017.

While the impact of Brexit is expected to be limited in 2016, the full impact of the transmission effects of Brexit are expected to hit the Singapore economy in 2017.

Following the Brexit vote result, IHS Markit has lowered its GDP forecast for the UK in 2017 from 2.4% to just 0.2%, due to the political crisis and ongoing political uncertainty, which will affect consumer and business confidence and sharply reduce investment in the UK in 2017. The overall Eurozone GDP growth forecast has also been cut from 1.8% to around 1.0% for 2017.

The post Singapore Q2 2016 GDP rises 2.2% year-on-year appeared first on The Insider Stories.

Source: The Insiderstories
Singapore Q2 2016 GDP rises 2.2% year-on-year

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