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Economists keep Singapore's growth forecast at 2.5% for this year

SINGAPORE — Private-sector economists in a survey have kept their full-year growth forecast for Singapore this year unchanged from the previous survey. This is in spite of a better-than-expected showing from manufacturing, finance and insurance, and wholesale and retail trade, as a drag from other sectors — construction and accommodation and food services — is anticipated.

A quarterly survey of professional forecasters conducted by the Monetary Authority of Singapore released at noon on Sept 6 showed that the 21 respondents project Singapore’s gross domestic product (GDP) to grow by 2.5 per cent this year, unchanged from the previous forecast. Photo: Peter Nguyen on Unsplash

A quarterly survey of professional forecasters conducted by the Monetary Authority of Singapore released at noon on Sept 6 showed that the 21 respondents project Singapore’s gross domestic product (GDP) to grow by 2.5 per cent this year, unchanged from the previous forecast. Photo: Peter Nguyen on Unsplash

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SINGAPORE — Private-sector economists in a survey have kept their full-year growth forecast for Singapore this year unchanged from the previous survey. This is in spite of a better-than-expected showing from manufacturing, finance and insurance, and wholesale and retail trade, as a drag from other sectors — construction and accommodation and food services — is anticipated.

However, economists are expecting a better showing for the third quarter, which may lift full-year growth expectations going forward.

A quarterly survey of professional forecasters conducted by the Monetary Authority of Singapore released yesterday showed that the 21 respondents project Singapore’s gross domestic product (GDP) to grow by 2.5 per cent this year, unchanged from the previous forecast. The economy’s growth for next year was also maintained at 2.5 per cent.

“We think the numbers will be raised eventually. When the survey was conducted, it was before the second-quarter growth figures were released, which came in higher than what the market had expected,” said DBS senior economist Irvin Seah, pointing out that the first half of the year’s GDP is at an average of 2.7 per cent, and is already higher than the forecast.

CIMB Private Bank economist Song Seng Wun added that if the economy’s third quarter is similar to the survey’s forecast of 3.1 per cent, it would bring year-to-date growth 
closer to 3 per cent. 

“There is greater confidence at this stage that the outcome will be at least 2.5 per cent for this year, supported by the stronger-than-expected manufacturing performance, due to sustained growth from semiconductors,” he said. 

For the second quarter, final data showed the Singapore economy expanding by 2.9 per cent from a year ago, above the median forecast of 2.7 per cent reported in the June survey. The better scorecard for the second quarter had led the Ministry of Trade and Industry to narrow the Republic’s GDP growth forecast for the year to the upper end of its earlier forecast. The growth forecast is now at 2 to 3 per cent, from its earlier projection of 1 to 3 per cent.

For the fourth quarter, the economists in the survey project GDP growth to slow to 1.8 per cent.

The economists expect manufacturing, finance and insurance, and wholesale and retail trade segments to expand by 6.6 per cent, 2.9 per cent and 1.3 per cent respectively for this year, up from the previous survey’s 5.0 per cent, 1.9 per cent and 1.1 per cent. Non-oil domestic exports is expected to grow by 7.4 per cent, compared with 5.6 per cent previously.

However, the economists slashed the forecasts of construction and accommodation and food services, which are now expected to contract by 4.2 per cent and 1.5 per cent respectively, reversing from the previous survey forecast of a growth of 0.2 per cent and 1 per cent. The downgrade in construction is not a major concern, said Mr Seah, as it is not a big driver to the economy. The sector to watch will be manufacturing, he said.

Mr Song added that the construction sector can improve if the Government accelerates spending through a pick up in public sector projects. 

In the survey, 47 per cent of the polled analysts believe that the electronics sector presents the strongest potential upside for the Singapore economy, while the regional and exports upswings were also cited as likely surprise drivers of growth.  

Meanwhile, 47 per cent of the respondents flagged geopolitical uncertainty, such as the North Korean stand-off and global trade protectionism, as downside risks. 

The respondents also cited the possible slowdown in Chinese economic activity as a concern. Seventeen of the 21 respondents provided inputs to the qualitative survey questions. The percentages are expressed as shares of these 17 respondents.

“The downside risks are not new and are an ongoing concern. People do expect slower growth in 2018, perhaps reflected by the slowdown in China and global monetary policy tightening. These are potential issues to watch out for in the months ahead,” said Mr Seah.

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