Sustained but slower YoY growth. Singapore’s economy expanded further YoY by +4.4% in 4Q 2013 (3Q 2013: +5.9% YoY), based on the advance estimate, which was slightly below consensus estimate of +4.8% YoY. The sustained – but slower – YoY growth last quarter was broad-based amid moderation in manufacturing (4Q 2013: +3.5% YoY; 3Q 2013: +5.3% YoY), services (4Q 2013: +5.5% YoY; 3Q 2013: +6.5% YoY) and construction (4Q 2013: +4.7% YoY; 3Q 2013: +5.8% YoY), mainly due to sharper contraction in biomedical manufacturing output, slower growth in transport engineering output, moderation in private sector construction activities, and softer expansions in the wholesale & retail trade and finance & insurance services.

Taking a breather on annualised QoQ basis. The economy shrank by a seasonally adjusted -2.7% annualized QoQ (3Q 2013: +2.2% ann. QoQ; consensus: -1.3% ann. QoQ), which is not surprising neither worrying, given the preceding four straight quarters of sequential growth. The contraction was across the board i.e. manufacturing (4Q 2013: -4.0% ann. QoQ; 3Q 2013: +1.2% ann. QoQ), services (4Q 2013: -1.7% ann. QoQ; 3Q 2013: +3.0% ann. QoQ) and construction (4Q 2013: -6.9% ann. QoQ; 3Q 2013: +1.7% ann. QoQ).

Keeping our 2014 real GDP growth forecast of 4%. The advanced estimate for 4Q 2013 implies a +3.7% growth in 2013 (2012: +1.3%), just a shade above our full-year estimate of +3.6% and within the official figure of 3.5%-4.0%. We expect the economy to grow by +4.0% in 2014. Official growth forecast for 2014 is 2.0%-4.0%.

As economy benefits from an improving world economy, hence external demand. With the net external demand accounting for almost 30% of its GDP, Singapore economy is benefiting from the improved global economic conditions, hence external demand, since mid-2013, especially in the form of a simultaneous growth among the major economies amid indications and expectations of a gradual pick up in the US, a modest post-crisis recovery in Europe, continued stimulus-driven expansion in Japan, and stabilising China’s economy from the earlier slowdown. Consequently, we expect global real GDP growth to accelerate to +3.5% from an estimated +3.1% in 2013. We also expect the turnaround in the global ICT industries to gain traction in 2014 in favour of Singapore’s export-based manufacturing sector. At the same time, regional economies’ trade activities in 2014 are expected to sustain the rebound that emerged during 2H 2013 on the rise in intermediate and final demands from within the region and from the major economies. These should be supportive of the trade-related services sector. Meanwhile, domestic-oriented services industries and construction sector would be supported by the ongoing supply side policies on housing and real estate developments, business services as well as community, social and personal services.

Source: Maybank Kim Eng Research - 3 Jan 2014