Singapore economy likely to expand 2.8 pct y/y in Q2, says DBS Bank

Upward revision for Singapore’s Q2 2017 GDP growth may be on the cards. The headline number due this Friday is likely to report an expansion of 2.8 percent y/y, up from 2.5 percent based on the earlier advance estimate. In sequential term, that’ll be an improvement of 1.0 percent q/q saar versus the previous official projection of 0.4 percent. June industrial output came in stronger than expected.

The final outcome of 13.1 percent y/y was higher than the assumption of about 12.4 percent implied by the advance estimates. This will bring overall manufacturing growth for the quarter to 8.1 percent, a tad higher than the official projection of 8.0 percent. The point is, growth in the manufacturing sector has somewhat held up, after an 8.5 percent showing in the previous quarter.

While growth momentum could taper off in the coming quarters, this sector has been the main driver of this growth recovery thus far. That said, the crux of the upward revision lies in the services sector.

Loan growth, container throughput and re-exports figures are all trending higher. Accounting for two-third of the economy, uptick in the services sector will surely lift overall GDP growth. The earlier advance estimates could have under-estimated the positive spill-over impact from the manufacturing to the services cluster.

"While we expect an upward revision in the Q2 2017 GDP figures, the point to note is that the outcome will have strong implications to our full year growth forecast of 2.8 percent. Any shortfall would require a reassessment of our projection for the full year, particularly given that first quarter growth was at 2.5 percent and growth momentum going forward could likely ease," DBS Bank commented in its latest research report.

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