SINGAPORE'S year of growing slowly ended on a bleak note, as the economy expanded far less in the final quarter of 2014 than economists had expected.
With global demand still weak, tourist arrivals plunging and restructuring weighing on certain sectors, the outlook for the months ahead remains sombre.
The economy grew just 1.5 per cent from October through December, down from the previous quarter's 2.8 per cent expansion.
Yesterday's data comes after Prime Minister Lee Hsien Loong revealed in his New Year message that the economy grew 2.8 per cent last year, significantly softer than 2013's 3.9 per cent.
The Government expects expansion of 2 per cent to 4 per cent this year.
The manufacturing sector, which makes up a fifth of the economy, was the main drag on growth in the final quarter.
Factory output contracted 2 per cent over the same period in 2013, according to advance estimates from the Ministry of Trade and Industry.
This was attributed to declines in transport engineering, electronics and general manufacturing.
Manufacturing expanded 2.4 per cent for the full year - up slightly from 2013's 1.7 per cent growth - thanks largely to a surge in the first three months of 2014.
Economic restructuring remains a challenge.
"Restructuring is impacting labour-intensive industries, hurting manufacturing and exports disproportionately, and accelerating the shift towards a more services- based economy," said Bank of America Merrill Lynch economist Chua Hak Bin.
Some segments of the service sector, which comprises 70 per cent of the economy, were also not spared the effects of slowing global growth and restructuring.
Overall expansion in the sector moderated from 5.3 per cent in 2013 to 3.1 per cent last year.
The lacklustre global environment dragged down trade-related segments, said CIMB economist Song Seng Wun.
The hospitality sector was also hit - visitor arrivals slid 3.3 per cent in January to October over the same period in 2013. Arrivals from China fell 28 per cent.
There were some bright spots, OCBC economist Selena Ling noted - in particular, the finance and insurance and business service segments remained key drivers for growth.
Construction expanded a mere 0.8 per cent in the fourth quarter last year over the same period in 2013, due to a slowdown in private sector building.
Full-year growth in the sector halved from 6.1 per cent in 2013 to 3 per cent last year. Even this was propped up by public sector construction projects such as MRT lines.
The latest data heralds a "new normal" of slower growth for Singapore, said ANZ economists Ng Weiwen and Glenn Maguire.
While restructuring is a "necessary evil", the country is at risk of becoming less responsive to global economic upswings, with "productivity gains insufficient to mitigate restructuring pains", they said.
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