2014.08.1206:11:17UTC+00Outlook up for Singapore after GDP expands

An unexpected expansion in Singapore’s gross domestic product (GDP) is buoying outlook for the country even as its manufacturing sector goes on a decline.

Latest data from the Singaporean trade ministry shows that GDP for Southeast Asian country grew at an annual rate of 0.1% during the second quarter of 2014 compared to the first three months of the year. Economists surveyed by Bloomberg News had originally forecast a contraction of 0.3% while an estimate in July suggested a larger drop of 0.8%. When compared to the previous year, GDP rose by 2.4% to surpass expectations of a 2.3% growth rate.

Manufacturing contracted by 15.2% when compared to the first quarter to be above the July estimate of a 19.4% decline. Services and construction each expanded by 4.5% and 0.3% respectively in the same period.

The recovery of advanced economies elsewhere around the world is helping greatly to Singapore’s economy due to its reliance on exports. Foremost in the trade ministry’s list of contributors is the strong recovery of the US economy in the second quarter, the possibility of more accommodative monetary policy in the eurozone, and measures introduced by China to boost growth.

Regional economist from CIMB Research Song Seng Wun says that, “Given the slowly improving external demand for both goods and services, led by developed economies, Singapore should be on track to achieve GDP growth of about 3 percent this year.”

Prime Minister Lee Hsien Loong forecasts a growth rate for Singapore somewhere between 2.5% and 3.5% in 2014. The trade ministry, however, warns that labor intensive sectors such as retail and food services may be slowed down in the second half of the year. DBS Group Holdings Ltd. economist Irvin Seah echoed the statement by claiming that, “Growth momentum going forward will be tepid.”