Singapore's blistering economic growth of the previous four quarters has come to an end. GDP declined by 2.3 percent in the third quarter on a quarter-on-quarter seasonally-adjusted annualised basis, according to a Ministry of Trade and Industry press release.
The third quarter of 2004 saw an expected moderation of growth in the Singapore economy. Advanced estimates revealed that real gross domestic product (GDP) in the third quarter rose by 7.7 per cent compared to the same period in 2003. On a quarter-on-quarter seasonally adjusted annualised basis, Singapore’s GDP declined by 2.3 per cent in the third quarter, reflecting a slowdown in the manufacturing and construction sectors.
Growth in the manufacturing sector cooled to 12.5 per cent in the third quarter after an exuberant second quarter. This is due largely to the decline in the biomedical manufacturing cluster arising from changes in production mix... [T]he construction sector continued to slip by an estimated 9.9 per cent in the third quarter... The services-producing industries are estimated to have expanded at a slower pace of 7.2 per cent year-on-year in the third quarter.
At the same time, the Monetary Authority of Singapore (MAS) issued a statement reiterating that it is maintaining its tightening bias.
Notwithstanding the slower growth, domestic price pressures are expected to persist, as the economy continues to expand and the labour market improves. In addition, there is an upside risk to external inflationary pressures from stronger commodity prices in particular, as well as the potential for a higher degree of pass-through of these cost increases in a strengthening domestic economy...
Going forward, the domestic economy will be entering a period of more moderate and sustainable pace of expansion. CPI inflation will remain largely contained for 2005 as a whole, although some upward pressures on consumer prices are expected. Against this backdrop, MAS will be maintaining its policy of a modest and gradual appreciation of the S$NEER.
So essentially, the MAS's decision to maintain its tightening bias reflects confidence that the economic expansion is sustainable and that the current soft patch is temporary.
Now where have we heard that before?