As government data indicated Tuesday, Singapore's economy grew at a faster-than-expected pace in
the first quarter despite the
central bank announcement there will be no change to monetary
policy.
Gross domestic product (GDP) grew an annualized 2.1 percent in the first quarter of 2015 compared with 2014, stronger than the 1.8 percent forecast in a Reuters poll and after expanding by the same margin in the fourth quarter.
Quarter on quarter, growth edged up 1.1 percent,
also beating the 0.5 percent estimate but much lower than the 4.9
percent expansion in the previous quarter.
"It's been a pretty dismal picture as far as exports are concerned. For an economy to come up with positive growth solely driven domestic demand, which is the challenges these days for advanced economies, Singapore seems to be doing okay," Taimur Baig, chief economist for Asia at Deutsche Bank said.
The manufacturing sector weighed heavily on growth. Industrial production in January and February shrank on average by about 1.2 percent from a year earlier, while a survey of purchasing managers showed manufacturing activity shrank in March for a fourth straight month.
According to the central bank, the Monetary Authority of Singapore, GDP is on track to grow 2-4 percent for the full year. The bank said it will maintain the policy of modest, gradual appreciation of the Singapore dollar.
Pushed higher by the news, the local currency reached 1.3625 against the U.S. dollar from 1.3720, or by 0.7 percent.
Currently, the city faces slowing inflation and weak global demand that have put pressure on its currency pressing it in March to a four-and-a-half year low against the US dollar.
The government is managing economic
headwinds by "keeping the labor market tight, getting employment
creation going and not create too much instability due to market
volatility."
"We've seen an orderly easing of property markets in the last couple of years that hasn't taken down the economy; construction is still adding positively and that will continue given the large private sector projects they have in place both in housing and transportation," Baig said.
"[But] manufacturing will not be that great this year given that it is highly correlated with the exports," Baig added.
The slowdown in sequential growth on quarter came mostly from the services sector but the better than expected overall performance has him revising full-year growth a notch higher, says Tim Condon from ING.
"The data lead us to revise our full-year GDP growth forecast to 2.9 percent from 2.8 percent," he said in a note.
