Reflecting pessimism, economists in MAS survey cut growth forecast to 1.9%

SINGAPORE — Private-sector economists have trimmed their economic growth forecasts for the city-state in 2016, joining in a series of downgrades from research houses last week as a slump in the manufacturing sector worsens.

The economists now expect Singapore’s Gross Domestic Product (GDP) to expand 1.9 per cent this year, down from the 2.2 per cent projected in December, according to the median forecast of 24 economists polled in a quarterly survey by the Monetary Authority of Singapore (MAS). For the first quarter, the respondents expect GDP to grow by 1.6 per cent.

Despite the adjustments, the 2016 forecasts are still within the Government’s official 1 to 3 per cent forecast.

The MAS survey, released on Wednesday (March 16), follows a line of less optimistic reports in recent months.

Last month, GDP final estimates showed Singapore grew 2 per cent last year, the weakest annual growth since 2009, when the economy was hit by the global financial crisis and shrank 0.6 per cent.

Late last week, DBS Group and Credit Suisse lowered their full-year GDP forecasts, citing a weaker global outlook amid lower-than-expected growth in the United States, Europe and Japan, which will place greater pressure on the manufacturing sector here. And on Tuesday, data from the Ministry of Manpower showed Singapore’s total employment grew at its slowest pace since 2003, while redundancies rose to its highest since the global financial crisis in 2009. Services formed the bulk of redundancies, followed by manufacturing and construction. 

The economists polled in the MAS survey on Wednesday expect the manufacturing sector to shrink further by 2.7 per cent this year, compared with the 1.2 per cent contraction forecast in the previous survey. They also trimmed their growth expectations for the finance and insurance sector to 3.6 per cent, from 5.9 per cent previously.

“It seems like economists are penciling in a weaker manufacturing sector. The weaker conditions could be sector specific, in the offshore and marine for example … The manufacturing sector is already at a contraction and is likely to continue its decline. We do not expect a pickup from the sector anytime soon,” said Credit Suisse economist Michael Wan.

UOB economist Francis Tan added: “The numbers related to the finance sector have not been doing strong. Loans growth, which contributes a big part to the sector, have not done well.”

Other sectors, such as the wholesale and retail trade sector saw a slight moderation to 3.9 per cent, from 4.0 per cent. The construction and the accommodation & food services sectors, however, had a higher forecast of 2.6 per cent and 1.6 per cent, compared with the 1.2 and 0.8 per cent in the earlier survey.

Meanwhile, the economists also lowered their inflation forecasts. The headline consumer inflation rate is now expected to come in at a -0.2 per cent this year, compared with the 0.5 per cent growth forecast previously. Core inflation, which excludes accommodation and private road transport costs, is expected to be at 0.8 per cent, moderating from the 1 per cent earlier. Both are in line with official forecasts.