Singapore’s economy grew 3.6% last year, higher than initial estimates due to the manufacturing sector which expanded by 10.1%.
The sector’s growth was largely driven by electronics and precision engineering clusters, even as clusters such as biomedical manufacturing and transport engineering contracted.
The Ministry of Trade and Industry said in a report on Wednesday that growth in 2018 is expected to be “moderate but remain firm” slightly above the middle of the forecast range of 1.5% to 3.5%.
In particular, the electronics and precision engineering clusters are projected to sustain a healthy, though more moderate pace of growth this year, on the back of robust global demand for semiconductors and semiconductor equipment.
Externally-oriented service sectors such as finance and insurance, transportation and storage, and wholesale trade are expected to benefit from firm external demand, although their pace of growth is expected to ease this year.
Growth of domestically-oriented services such as retail and food services are expected to broaden on the back of an improvement in consumer sentiments amidst the ongoing labour market recovery, said MTI.
One concern is the performance of the construction sector which is likely to remain lacklustre in 2018 due to earlier weakness in construction demand, particularly from the private sector. The sector shrank by 8.4% last year.
The outlook for the marine and offshore engineering segment is also expected to remain challenging.
While the outlook for global growth has improved slightly since last November, growth in most of Singapore’s key final demand markets such as the Eurozone, Japan, and Asean-5, is projected to moderate or remain unchanged this year.
“On balance, the external demand outlook for Singapore is expected to be slightly weaker in 2018 as compared to 2017,” said the report.
While global macroeconomic risks has receded to some extent since the end of 2017, there remain some downside risks which could weigh on the global economy if they materialise such as concerns over protectionist sentiments , especially in the United States.
Unexpected increases in inflation could also result in the US central bank raising interest rates faster.