The Singapore economy just posted a 1.7% GDP growth in the latest quarterly result today – way below the expectation from the Monetary Authority of Singapore (MAS)’s prediction of 2.7% for 2nd quarter 2015. Economists who participated in a poll with Bloomberg have also estimated wrongly at 2.6% and the latest GDP result is even lower than the 2.8% in the earlier quarter.
The shrink in GDP is largely due to the contraction of the manufacturing sector, especially in biomedical (-28.6% in a year, see report below) and transport engineering, which declined over 4% in the same quarter last year – its third consecutive month of decline. The service industries and the construction sector grew 3% and 2.7% respectively and the overall economy declined by 4.6% on a quarter-to-quarter seasonally-adjusted annualised basis.
The Singapore Government is however still optimistic about the economy outlook and believe the year end GDP for 2015 will still be between 2-4%.
The intake of foreigners have been cut in light of the coming General Elections and this has adversely affected Singapore’s GDP growth as productivity has also been falling. In June, the Manpower Minister Lim Swee Say tacitly admitted that Singapore has only been growing its GDP by growing the population without paying attention to productivity growth. In the past decade, the Singapore Government has been relying on cheap foreign labour to bolster profits of companies and the national GDP. As the national GDP is a variable component of the Singapore Government Ministers’ salaries, the ruling party resisted public pressure for a Minimum Wage and has always maintained a high GDP is overall better for Singaporeans than having a system that decreases the income gap.