Updated: 07/15/2014 01:50

Spore's economic growth slows but second half looking rosier

Spore's economic growth slows but second half looking rosier

Singapore's economy grew at a moderate 2.1 per cent in the second quarter. 

The slowdown from 4.7 per cent growth in the first quarter was due lower manufacturing activity. 

Economists tell Travis Teo that the outlook for the second half will be rosier.

The Trade and Industry Ministry's flash estimates showed that Singapore's manufacturing cluster slumped almost 20 per cent compared to the first quarter. 

Credit Suisse economist, Michael Wan explains the weak performance of the cluster, which accounts for a quarter of the economy. 

"The reason for this is there's an electronics factory which left Singapore back in April so that contributed to weakness in electronic production and this was also further compounded by weakness in biomedical manufacturing in May."

Senior Economist at Mizuho Bank, Vishnu Varathan says the manufacturing sector is undergoing restructuring which will see a greater focus on higher value-add. 

"Two factors at play, one is the restructuring and productivity drive onshore, it does motivate some questions about whether the firms in the medium term will stay competitive in singapore if they are not valuing outward. And the other external forces thats taking place is regionally manufacturing is catching up very quickly in a lot of the asean countries and even the greater mekong sub region."

Some economists say that the Singapore economy could fall into a technical recession after shrinking 0.8 per cent in the second quarter. 

But most like Mr Wan of Credit Suisse agree that Singapore would do better in the second half given the stronger outlook for the US and Europe. 

"We are seeing some tentative signs that import demand from the US is picking up. So we do expect that to benefit not just Singapore but the asia region. 

While Mizuho Bank's Mr Varathan says improving fundamentals in the region would help. 

"There is a bit of a risk that we could indeed see a technical recession but I think the broader story here is it will be a shallow one, China is a major impetus, and China stimulus coming through, means that we expect to see China bottoming in Q2 and picking up in Q3. If indeed it does then Singapore is better place to advert a technical recession, but the big picture is that the second half growth should begin to regain some traction." 

Singapore's official growth forecast is between 2 and 4 per cent for the full year. 

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