Private sector economists trim 2016 GDP to 1.8%: MAS survey

SINGAPORE — Private-sector economists have trimmed their economic growth forecast for the Republic for this year as a better performance by the manufacturing sector was offset by weaker expansion in the finance and insurance, and wholesale and 
retail trade segments.

Gross Domestic Product (GDP) is now expected to expand 1.8 per cent for this year, compared to the 1.9 per cent forecast in March, based on the 22 respondents in the latest quarterly survey by the Monetary Authority of Singapore. 

The growth, however, is still within the 1 to 3 per cent official forecast. For next year, GDP is expected to come in at 2.1 per cent.

The economists had expected the first quarter to come in at 1.6 per cent but final figures for GDP showed an expansion of 1.8 per cent, due to a stronger-than-expected showing by the manufacturing sector.

Standard Chartered economist Jeff Ng said: “Expectations are now stabilising and growth is seen to be more modest.”

“The revision reflects a more cautious attitude from the economists, as there is more info and visibility now with the first quarter performance released. We are seeing a shift of the tide – the manufacturing sector contracting at a smaller scale, and services expanding slower,” noted UOB economist Francis Tan.

“The diverging drivers — with the services sector deteriorating and manufacturing slightly bottoming out — all points to a more subdued picture,” Mr Ng added.

The manufacturing sector, which contributes to about one-fifth of the Republic’s GDP, showed a flat growth compared to the previous survey poll of a 2.7 per cent contraction. 

Other sectors, such as construction and accommodation and food services, showed an improvement from the earlier survey, and rose from 2.6 per cent and 1.6 per cent to 3.3 per cent and 1.8 per cent, respectively.

“The manufacturing sector looks to a possible improvement due to the boost from the electronics and biomedical manufacturing clusters. 

Demand for semiconductors is seen from the United States with strength seen in the US book-to-bill ratio,” Mr Ng said.

Meanwhile, the finance and insurance and wholesale and retail trade sectors moderated to 2.9 per cent and 2.0 per cent, compared to the previous expectation of a 3.6 per cent and 3.9 per cent increase, respectively.

“The finance and insurance sector is seeing a continuation in year-on-year contraction in monthly bank loans transactions while the wholesale & retail trade sector is affected by weak exports,” Mr Tan noted.

Last month, trade agency IE Singapore downgraded both the Republic’s total trade and non-oil domestic exports for this year, citing a weak global economic outlook.

On Wednesday (June 15), the economists in the survey also adjusted the headline inflation forecast, and it is now expected to come in at minus 0.4 per cent, compared to the minus 0.2 per cent in the previous survey. Core inflation, which excludes accommodation and private road transport costs, is expected to be at 0.8 per cent, unchanged from the previous survey.

Both inflation indicators are in line with official forecasts.