Singapore's economic expansion moderated as persistent geopolitical tensions in the Middle East offset some of the export gains fueled by the artificial intelligence boom.
According to preliminary estimates from the Ministry of Trade and Industry released on Tuesday, gross domestic product increased by 5.7% in the second quarter compared to the same period last year. This figure is lower than the revised growth rate of 6.3% recorded in the first quarter and came in slightly above the median forecast of 5.5%.
The slowdown indicates that robust demand for AI-related electronics may not be enough to completely shield the Singaporean economy from escalating global uncertainties. While electronics exports surged by nearly double in May year-on-year, renewed conflict in the Middle East has cast a shadow over the trade and investment outlook.
The Ministry of Trade and Industry reported that manufacturing was the sole sector to accelerate on an annual basis during the quarter, whereas construction and all service industries experienced a deceleration in growth.
On a seasonally adjusted quarterly basis, the economy expanded by 1.1%, falling short of the median estimate of 1.3% from the Bloomberg poll.
In June, Prime Minister Lawrence Wong cautioned that the economy has not yet felt the war's complete impact, and uncertainty persists regarding the nation's growth and inflation trajectory. Rising global energy prices are also expected to affect households, with electricity tariffs slated for a record 17% increase in the third quarter.
The MTI stated in May that it anticipates full-year GDP growth within a range of 2% to 4%, a moderation from the 5% growth achieved last year. Final economic data for the second quarter is scheduled for release in August.
The Monetary Authority of Singapore is set to announce its policy decision by July 31. Following benign inflation figures for May, most economists are predicting that the central bank will maintain its current policy settings.
Comments