Singapore yesterday cut its growth forecast for this year and eased monetary policy as it warned that the weakening global outlook would weigh on the city-state’s output.
The downbeat outlook for the export-driven nation came despite data showing that the economy grew more than expected in the three months to the end of last month.
Singapore’s Ministry of Trade and Industry (MTI) said the economy grew 5.9 percent in the third quarter from a year ago, a big improvement from the 1 percent jump recorded in the previous quarter.
It also exceeding a Dow Jones Newswires analysts’ forecast for a 5.6 percent surge.
On a quarter-on-quarter annualized basis, economic output rebounded to surge 1.3 percent after contracting 6.3 percent in the April-June period.
However, the ministry trimmed its growth outlook for this year to 5 percent from 5 to 6 percent previously, saying: “For the rest of the year, growth could be weighed down by the softening global economic conditions.”
Many Asian export economies are concerned that the ongoing crises in Europe and the US — the two biggest markets for most nations — will hurt growth at home.
Growth in the third quarter was mainly because of a pick-up in biomedical factory output, including pharmaceuticals, boosting overall manufacturing by 13.2 percent year-on-year, the ministry said.
Construction output grew a modest 0.4 percent from a year ago and the services-producing sector was up 3.6 percent, the ministry added.
Also yesterday, the central bank, in its twice-yearly policy statement, said it would ease monetary policy by allowing the Singapore dollar to appreciate at a weaker pace, despite concerns over inflation, as it tries to boost exports.
“The outlook for the global economy has deteriorated sharply against the backdrop of increased uncertainty in financial markets,” the Monetary Authority of Singapore (MAS) said in a statement. “Given the stresses and fragility in the advanced economies, the prospects for growth in Singapore’s major trading partners have deteriorated.”
The MAS said it “will continue with the policy of a modest and gradual appreciation” of the Singapore dollar in the immediate future, but added that “the slope of the policy band will be reduced.”
Analysts said the comment meant monetary authorities will allow the Singapore dollar to appreciate at a slower pace than before.
The central bank expects growth to slow to 2.5 to 3.5 percent next year given the uncertainties in the global economy, especially in developed world.
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