Singapore Manufacturing to ease in 2008: MTI
By LYNETTE KHOO
(SINGAPORE) After growing at an easier pace of 5.8 per cent last year - down from 11.9 per cent in 2006 - the manufacturing sector here is expected to moderate further this year as the US economy slumps, the Ministry of Trade and Industry (MTI) said.
Electronics has already gone into a period of slow growth and there are signs of recovery. The difference is if the pessimistic scenario unfolds, the net recovery could well be aborted and you could have a sharper downturn.
‘It would definitely be lower under the pessimistic scenario but there are some industries within manufacturing that will be relatively more resilient under this scenario of a deeper slowdown,’ MTI second permanent secretary Ravi Menon said at a briefing yesterday.
In the MTI’s GDP outlook for 2008, it painted two scenarios. The first one is where the US enters a mild recession in the first half but recovers in the second half, supported by its strong fundamentals coupled with fiscal and monetary stimulus.
The second is a so-called ‘pessimistic’ scenario where the US slips into a more severe recession, affecting the region more significantly.
Industrial output, which accounts for a quarter of Singapore’s GDP, grew a marginal 0.2 per cent in the fourth quarter in 2007 from a year ago on a 28 per cent contraction in the biomedical cluster. On an annualised seasonally adjusted basis, industrial output slumped 24.9 per cent from the preceding quarter.
MTI’s director of economics and strategy division Cheang Kok Chung noted that there is good potential for a rebound in output in the first quarter as the fourth quarter slump in 2007 was largely due to the sharp contraction in the volatile biomedical cluster - which is a usual wild card.
Mr Menon noted that within the manufacturing sector, the impact of a US economic slump could vary across the clusters, with electronics and precision engineering likely to be harder hit under the pessimistic scenario given their export-oriented natures.
‘Electronics has already gone into a period of slow growth and there are signs of recovery,’ he said. ‘The difference is if the pessimistic scenario unfolds, the net recovery could well be aborted and you could have a sharper downturn.’
Other industries may not experience significantly different impacts under the two different scenarios.
Among them is transport engineering, where order books are full and there is a pipeline of jobs for the year ahead. The chemical cluster also follows its own industry-specific cycle and its growth rate is largely determined by existing capacity, Mr Menon said.
But some economists and analysts are predicting a mild contraction in the manufacturing sector this year. Citigroup expects a 0.3 per cent decline in manufacturing output in 2008, comprising a single-digit fall in the first half of the year and a bottoming out in the second quarter. Westcomb Securities is predicting a one per cent contraction for the full year.
‘The electronics slump will probably deepen even though I don’t think it will be as bad as in 2001, but the risk is definitely on the downside,’ Citigroup economist Kit Wei Zheng said.
On the other hand, DBS Group economist Irvin Seah is expecting 2 per cent growth in manufacturing output this year, with support from the transport engineering and biomedical clusters. Capacity expansion in electronics and drugs production may also translate into higher output in the second half, he said.
‘We do not expect electronics to recover within the first half of the year but the second half will really depend on how the US economy is able to weather the current deterioration in its growth outlook,’ Mr Seah said.
Source : Business Times - 15 Feb 2008
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