FINANCIAL SERVICES SECTOR grew by 2.0% in 1Q05, faster than the
0.4% recorded in 4Q04. Growth was driven by the continued strength
of the offshore banking segment, as both inter-bank and non-bank
loans were sustained at high levels. At the same time, trading
activity in the foreign exchange market surged to new highs.
Meanwhile, transaction activity in the domestic stock market,
while having shown signs of picking up, nevertheless remained
considerably below the levels seen in the first quarter of 2004.
Insurance activities also weakened in 1Q05, on the back of
softening demand in the key life insurance segment.
BUSINESS SERVICES SECTOR expanded at a slower rate of 2.1% in
1Q05, compared to the 2.3% gain in 4Q04. Growth of the sector was
dragged down by the decline in the real estate segment. This was
partially offset by the strong growth of architectural and
engineering services, Legal and accounting services also
registered higher growth rates. The growth of the business
services sector was also supported by the continued sterling
performance of business representative offices and IT and related
services, even though they grew at a slower pace compared to 4Q04.
Employment gains moderated in 1Q05 amid a
slowdown in economic growth. Total employment increased by 11,600,
lower than the 32,700 job gains in 4Q04. In tandem with the
slowdown in employment growth, the seasonally adjusted overall
unemployment rate rose slightly from 3.7% in December 2004 to 3.9%
in March 2005. Nevertheless, the unemployment rate in March 2005
was still lower compared to the overall unemployment rate of 4.5%
in March 2004. On a similar note, the number of workers retrenched
in 1Q05 dropped to 2,000, a reduction of 38% from the previous
quarter or about a one-third reduction from the numbers reported
in the first quarter of last year.
Overall productivity fell 0.8% in 1Q05,
reversing the 3.4% gain in the previous quarter. The construction
sector suffered the largest fall in labour productivity, declining
by 5.1%. Financial and business services also recorded declines of
4.3% and 4.2%, respectively. On a similar note, manufacturing
productivity contracted by 2.7%, after climbing 7.3% in 4Q04.
Meanwhile, the largest gains in labour productivity were
registered by wholesale and retail trade (3.6%) and transport and
The overall unit labour cost (ULC) posted the
second consecutive increase of 3.4% in 1Q05, after climbing 1.5%
Unit business costs in the manufacturing sector posted
its first quarterly gain in seven quarters, rising 3.1% in 1Q05.
This was due mainly to an increase in manufacturing ULC, which
rose by 6.6%, reversing the decline of 5.8% in the previous
Singapore¨s external trade rose by 11.3% in
1Q05, moderating from the18.1% growth in 4Q04. Growthof total
exports slowed to 10.7%, after a 17.5% increase in the previous
quarter. Both domestic exports and re-exports expanded at a slower
pace. Domestic exports grew 11.3% while re-exports increased by
10.0%. Similarly, the rate of growth of non-oil imports (excluding
aircraft and ships) dropped to 7.6% in 1Q05, after expanding by
14.4% in 4Q04.
Fixed-asset investments amountingto
$1.8 billion were committed in the manufacturing sector in 1Q05.
When these commitments are realised, they will create a value
added of $0.8 billion and generate almost 3,000jobs of which 45%
are for skilled workers.Investment commitments in theservices
sector promoted by EDB amounted to $678 million in total business
spending in 1Q05. When these commitments are implemented, they
will generate a value added of $1.6 billion and create about 3,000
jobs of which 74% are for skilled workers.
Balance of Payments
The current account surplus fell from
$13.1 billion in 4Q04 to $11.7 billion in 1Q05, mainly due to a
fall in the goods account surplus. Net income outflows decreased
from $1.5 billion to $0.3 billion in 1Q05. The net outflow in the
capital and financial account rose to $8.1 billion, from $2.9
billion in the previous quarter. Singapore¨s overall balance of
payments turned in a smaller surplus of $4.8 billion in 1Q05,
compared to $8.7 billion in 4Q04.
Consumer Price Inflation
On a year-on-year basis, CPI
increase eased to 0.3% in 1Q05, from 1.7% in 4Q04. The cost of
transport and communications registered a decline of 2.4%.
Meanwhile, price indices of the other major categories of consumer
items registered small gains. Education costs increased by 1.9%
while food prices rose by 1.6%. Cost of items in the recreation
and others category also increased 0.8%. Similarly, the cost of
clothing, housing and healthcare rose by a marginal 0.5%, 0.4% and
Outlook for 2005
Going forward, further deceleration of the
G-3 economies cannot be ruled out, after the weaker-than-expected
performance of the US economy in the first quarter of 2005. Moving
through 2005, the slowdown might be further compounded by higher
US inflation and thus higher interest rates.
outlook for Japan is negative with a more rapid slowdown of
growth. Growth of the EU economy is also forecasted to ease
slightly. The moderation in the G-3 economies will however
mitigate the adverse impact of persistently high oil prices.
Despite these concerns, external demand is still expected to
remain supportive of economic growth in the near-term. Global
trade is forecasted to remain firm. Economic growth rates in key
Asian economies are also projected to remain robust.
the unexpectedly strong growth in global semiconductor sales which
surged by 13.2% in 1Q05 and the pick-up in various forward looking
indicators suggest that the global semiconductor downturn, which
was widely expected, may not be protracted.
leading index (CLI), an indicator that leads economic activity by
about three quarters ahead, finally turned upwards with an
expansion of 1.0%. The reversal in trend points to the possibility
of an early return of economic growth momentum. Lending weight to
the possibility of a sooner-than-expected upturn, the latest
business expectations surveys show sentiments improving in both
the manufacturing and services sectors
However, in view of the
weaker-than-expected performance of the economy in the first
quarter of 2005, the Ministry of Trade and Industry has revised
the GDP growth forecast for 2005 downwards from 3.0-5.0% to