Singapore Turns to Service as Global Economy Weakens
Singapore is counting on its position as an Asian financial hub to bolster services exports as overseas demand for its goods falters amid an uneven global recovery.
The growing importance of services has prompted the government to release quarterly figures on the sector, Ow Foong Pheng, permanent secretary of the Ministry of Trade and Industry, told reporters Tuesday. Services trade rose to almost 27 percent of the total last year from about 20 percent a decade earlier, she said.
That share is set to increase with a rising middle class in the region boosting demand and a planned regional economic community set to lower barriers to trade, the ministry said today. A government push to reduce the island’s reliance on cheap foreign labor is also pushing manufacturers to move into services such as design and research and development.
“The near-term outlook for Singapore’s merchandise exports remains modest,” the trade ministry said in a report today. Overseas sales of services including finance and insurance are “expected to provide support to overall exports growth.”
While economic growth in the U.S. is expected to accelerate, the recovery in the euro area will probably remain weak due to deflationary pressures and a sluggish labor market, the trade ministry said today. Japan’s economy is expected to remain “lackluster” and China’s growth is expected to ease further, it said.
Singapore’s manufacturing industry contracted an annualized 2.5 percent in the fourth quarter from the previous three-month period. Services expanded 7.8 percent last quarter, with finance and insurance surging 36 percent.
Financial and other business services, including accounting and legal practices, make up close to 40 percent of Singapore’s services exports, the trade ministry said.
Services exports expanded 6.7 percent on a compounded annual basis from 2010 to 2014, compared with 2 percent growth in goods shipments in the same period, according to the trade ministry. Total services trade rose 2.4 percent to S$357.3 billion ($264 billion) in 2014, after increasing 8.9 percent the previous year, a separate release showed.
Source: Bloomberg – Singapore Turns to Service as Global Economy Weakens
