Economists upbeat on Q4, 2014 growth

SINGAPORE — The Republic’s economy picked up steam in the final quarter of this year, with momentum likely to continue into 2014, prompting private sector economists to upgrade their growth forecasts, a quarterly survey by the Monetary Authority of Singapore (MAS) showed yesterday.

The 21 forecasters surveyed expect gross domestic product to expand by 3.8 per cent this year, with fourth-quarter growth coming in at 4.7 per cent. These are higher than the 2.9 per cent and 3.4 per cent, respectively, forecast in a September survey. The forecasters are also expecting GDP to grow by 3.9 per cent next year.

The upward revision is in line with the Ministry of Trade and Industry’s growth forecast, which it upgraded last month to between 3.5 and 4 per cent this year and 2 to 4 per cent next year.

Economists TODAY spoke to said the optimism comes from an improving external landscape and a domestic market that continues to be resilient.

“We’ve seen more signs of stronger recovery globally towards the year-end and into 2014 as well, with various central banks more upbeat, economies such as China and South Korea picking up due to better demand from the US and even the euro zone. So, clearly, there is some momentum in the advanced economies that will filter down to Asia, including Singapore,” said Barclays economist Joey Chew.

Sharing her sentiment is UOB’s Francis Tan, who said: “We’re seeing a recovery in manufacturing based on the monthly industrial production data. The trend is upward and the electronics sector has seen an improvement in final demand … So, looking at such data points and a few months of trend, I think that made the forecasters more upbeat.”

Exports, though, are expected to be a drag. The forecasters surveyed now expect non-oil domestic exports (NODX) to shrink 3.9 per cent this year, compared with the 0.7 per cent contraction estimated in the last survey. This comes after trade agency International Enterprise last month adjusted its NODX forecast downwards, predicting a contraction of 4 to 5 per cent, from 2 to 4 per cent growth.

Mr Tan said the uptick in NODX has been somewhat delayed because of declining export prices, which has resulted in factories with holding power choosing not to sell their products in the current environment. Manufacturers also seem confident that demand for their goods will improve in the near future.

“The Purchasing Managers Index showed that factories are quite optimistic about new orders and have been accumulating inventories, so this shows they think demand will return, but not now,” Mr Tan said.

While things are looking up, the economists TODAY spoke to said firms should be mindful of headwinds such a tight domestic labour market and rising costs, and potential challenges from the US winding down its stimulus package. Ms Chew said: “The better US economy is a little bit of a double-edged sword. On one hand, improved US demand should help Singapore. On the other, the financial market reactions might be a little bit destabilising.”