Singapore's manufacturing is expected to remain in recession

Singapore's manufacturing is expected to remain in recession. Though 3Q15 GDP figures announced recently were encouraging, today's industrial production numbers will pour a cold bucket of water over the optimism. Production output is expected to show a decline of 3.2% YoY. Although one can argue that this is an improvement from a 4.8% contraction in the previous month, do note that this is the ninth consecutive months of decline in production. 

The manufacturing sector has been in recession. It has contracted by 3.7% over the past four quarters. Moreover, its GDP share has fallen from 26% in 2004- 06 to just 17% in 2013-2014. Beyond the cyclical drag, the manufacturing is weighed down by structural challenges. External competition, continued increased in business costs and manpower shortage are eroding the longer term prospects of the sector. 

It's time for policymakers to intensify their efforts to promote growth in this sector. Manufacturing has always been an important engine for the Singapore economy and the nation wouldn't have achieved today's success if not for the tremendous progress made in this area. However, at the current pace of decline in the GDP share of the manufacturing sector, Singapore could well follow the path of Hong Kong in this regards eventually.