Weak external demand, China could affect the Republic’s 2016 growth: Moody’s

SINGAPORE — Moody’s Investors Service said yesterday it expects Singapore’s economic growth to come in at 1.6 per cent this year, the lower end of the Government’s official forecast, mainly due to a slowdown in external demand and linkages with China.

“As one of the most trade-dependent economies globally, Singapore is especially vulnerable to the current lackluster global trade conditions. In particular, Singapore’s close trade and financial linkages with China imply that the slowdown in China presents significant challenges for Singapore, particularly given the island state’s role as an international financial centre in the Asia Pacific region,” said Moody’s in a report.

Moody’s report, which is an annual update to investors and not a rating action, reflects a similar subdued picture painted by private-sector economists in a survey released by the Monetary Authority of Singapore earlier this month.

In the MAS survey, the economists trimmed their growth forecast for the Republic for this year to 1.8 per cent from the 1.9 per cent forecast in March, citing a possible weakening of the finance and insurance and wholesale and retail trade sectors.

The Government’s estimated growth range is 1 to 3 per cent.

Moody’s comments were contained in its just-released credit analysis, titled Government of Singapore — Aaa Stable: Annual Credit Analysis.

It said that Singapore’s growth is expected to be significantly slower than it was between 2000 and 2010, when it averaged 6.2 per cent annually. Singapore grew at 2 per cent last year.

“A slowdown in external demand will remain the key drag. Industries with high exposure to global conditions, such as engineering — including marine and offshore engineering — and oil and gas, will be most affected,” said Moody’s.

Moody’s said Singapore’s Aaa rating remains supported by very high per capita income levels, economic competitiveness, strong fiscal metrics, and robust institutions. But it also added that the rating could come under downward pressure if ongoing restructuring efforts fail to keep growth from slowing further to levels below those consistent with Aaa peers over the medium term, or if the government’s fiscal position weakens materially either because of lower growth or a shift in fiscal policy.