The start of the New Year in Singapore came with a gloomy feeling in the manufacturing sector. With the country becoming more service-oriented, analysts were still emphatic on the slowdown in the manufacturing sector. In the last quarter of 2015, the manufacturing sector in the country slowed down for the 11th straight month and this sent shockwaves in the industry. On a year-on-year basis, the sector’s output decreased 0.5% in March 2016.
However, a recent industry review by the Ministry of Industry and Trade (MIT) has given some impetus to the sector. The second quarter of 2016 handed the industry its first on-year growth since quarter three of 2014. This comes as the country’s economy looked up with the service sector driving the expansion. However, analysts are now warning that the manufacturing sector is facing a real risk of softening in the second half of the year.
The 2H16 has already started on with a slate of global shifts that are bound to affect the markets. Britain’s exit from the European Union (EU) has created uncertainties in the market. The economic slowdown in China is also causing a major concern in the manufacturing sector considering China remains the major destination for non-oil domestic exports (NODX), taking 13.6%. Closely at 12.6% behind is Europe, which is also facing the post-Brexit uncertainties and at 9.5% is the U.S.
All these economics are grappling with national and international uncertainties including elections in the U.S and the post-Brexit ripple effects in Europe. The economic repercussions of global occurrences in all these export markets are expected to affect Singapore’s manufacturing sector. Analysts are now warning that the industry might crumble in H2 depending on how the government will react to ongoing changes.
Analysts argue that the small economy is already experiencing slow growth arising from external factors in China and Asia and these will be felt largely in its export-dependent manufacturing market. Analysts have also been quick to note that the entire industry’s growth has been pegged on a few sectors including biomedical manufacturing and electronics. Large sectors’ output including chemical and transport engineering fell during the first quarter of 2016.
The impact of global shifts on the country’s economy has for a long time been a major concern for economists in the country. For a small and open economy, the country remains exposed to major shifts and this is one reason economic experts are urging caution when assessing the prospects of the manufacturing sector.