Despite initial estimates, the economy grew faster than initially expected in the second quarter, signalling a recovery following a stumble earlier in the year. According to the Ministry of Trade and Industry, growth of around 2.5% is expected in 2017. 
From an industry sector perspective, manufacturing has been a clear winner in 2017 having expanded by 13.1% year-on-year. This sector, alongside the electronics and precision engineering industries, have been key drivers of Singapore’s growth. A large part of this growth is derived from an uptick in global demand in Singaporean exports, most noticeably in the transportation and storage industries. These two industries contributed to 74% of Singaporean GDP.
The construction sector shrank in the second quarter, extending an initial contraction Q1. Economists attribute this to weakness in both private sector and public sector construction activities. Other areas, such as retail and food and beverage continue to face headwinds – coupled with slower demand, retailers are also contending with longer-term challenges such as the rise of e-commerce.
As of May 2017, there are 216,900 enterprises in Singapore, 99% of which are small and medium sized enterprises (SMEs) accounting for 65% of the total employment of 3.4m people. SMEs are defined as enterprises with operating receipts of not more than US$100m and no more than 200 workers.
For the full year 2016, external demand grew at a slower pace of 1.6%, compared to the 2.6% growth in the previous year, amidst sluggish global economic conditions. The growth in external demand was largely driven by real merchandise exports, of which mineral fuels, chemicals and chemical products were the key contributors.
Real services exports also contributed positively to growth, supported mainly by robust growth in the exports of transport and travel. For 2016 as a whole, total domestic demand saw a slight reduction of 0.1%, compared to the 2.1% increase in 2015. Domestic demand was affected by a decline in gross fixed capital formation and a smaller build-up in inventories, which offset an increase in consumption expenditure.
SMEs are being encouraged by the Government to internationalise, leverage global talent and knowledge. By collaborating with partners from major innovation hubs, businesses can develop technology and adopt innovation to reach overseas markets. According to the Singapore Budget 2017, the Government will work with other businesses, large organisations, trade associations and chambers to strengthen outreach and support of SMEs from different industries.
The Singaporean Government is also championing initiatives to support SMEs – including the SPRING SME Working Capital Loan – where local enterprises can access unsecured working capital financing in a period of slow economic growth, with the scheme valid until 31 May, 2019.
Another area of support is the Loan Insurance Scheme which helps companies secure trade finance from participating financial institutions by insuring the institutions against insolvency risks of the company. Loans are underwritten by commercial insurers and a portion of the insurance premium subsidy is supported by the Government. The scheme also comprises the Loan Insurance Scheme Plus (LIS+) whereby the Government underwrites loans that are beyond the capacity of commercial insurers.
Overall there are signs that the challenges in the economy are related to challenges in local demand rather than any dearth in support for enterprise. Exports continue to be a strong area for the economy and it is unsurprising that the Government is pushing SMEs to internationalise, in the hope that they too can benefit from export led growth.