Trade-reliant Singapore will increasingly look to its services sector in the future as it tries to soften the impact of any further global economic crises, the central bank said Thursday.
The announcement comes as the city-state, which currently relies heavily on manufacturing to drive growth, struggle out of its deepest recession in its history as global trade was battered by the global downturn.
“From a sectoral perspective, the engines of growth will shift going into next year,” the Monetary Authority of Singapore (MAS) said in its twice-yearly Macroeconomic Review.
It said that “the services sector will account for the bulk of next year’s growth.”
While industry will remain an important pillar for the economy, services will be developed as another growth engine after it proved more resilient during the current downturn, it added.
“Such diversification would help reduce the vulnerability of growth to large swings during crises and minimise the economy’s dependence on a few correlated sectors.”
Manufacturing, which covers Singapore’s main exports and accounts for about a quarter of the economy, was hit by the global slump and earlier this month data showed industrial output was down 7.7 percent year on year in September.
However, the sector is expected to recover at a “moderate pace” in line with a mild pickup in demand from the main markets including the United States and Europe, the central bank said.
As the global downturn eases Asian countries have moved to rebalance their economies toward greater demand from within the region, the central bank said.
Despite the poor data, recent figures suggest Singapore’s economy was recovering from recession with preliminary data released earlier this month showing 0.8 percent growth in the third quarter.
The government also upgraded its 2009 forecast to a contraction of 2.0-2.5 percent, smaller than the previous estimate of 4.0-6.0 percent shrinkage.