Singapore economy expands by 1.8 per cent in Quarter 1
The skyline of the central business district in Singapore Reuters

The ongoing recovery in global trade and the improved growth dynamics are expected to pave the way for Singapore economy's 2.7 percent expansion this year. However, the economy is set to rise with the backdrop of uneven sector performances.

According to the latest report by ICAEW, Singapore's growth contracted by 1.3 percent quarter-on-quarter in the first quarter of the year, pulling back from a 12.3 percent in Q4 2016. The report stated that the outlook is brighter especially for sectors which are dependent on external factors.

More so, a humble recovery in the business investment is foreseen given the 8.1 percent rise in business loans in the first quarter of the year. This is the strongest growth in loans since 2014.

Meanwhile, exports growth in the city-state is expected to firm up following the poor numbers registered in April. Exports data point to a rocky recovery as Purchasing Managers' Index was slightly down from the 26-month high seen in March as new export orders remain solid. However, an easing in Chinese import demands will cause a pullback in exports in the coming quarters.

On the other side of the coin, sectors which rely on internal factor will need more time to get back on their feet. The unemployment rate, for instance, has been at its highest since 2010 and will only improve later this year as financial services and oil & gas industries pick up.

Also, a recovery in the declining housing costs could be elusive in the near future. The supply overhang in the housing market will largely impact recovery even with the recent easing in the areas like mortgages and stamp duties.

ICAEW South-east Asia Regional Director Mark Billington said in a statement: "We are confident that an improved external environment will help sustain Singapore's growth – despite the drag from domestic factors. Moving forward, we expect domestic demand to remain the primary driver of growth. As the recovery in external global trade remains unsteady, we envisage ASEAN nations using more fiscal stimulus to support domestic demand."