Economists cut 2017 growth outlook for Singapore: MAS survey

SINGAPORE — Private sector economists have trimmed their economic growth forecasts for Singapore for the third and fourth quarters of this year, as well as next year, amid ongoing concerns over Brexit and China’s economy, but they have kept their projections for 2016 growth unchanged. 

Gross Domestic Product (GDP) is now expected to expand 1.8 per cent next year, compared with the 2.1 per cent forecast in June, based on responses from 22 respondents in the latest quarterly survey by the Monetary Authority of Singapore (MAS). 

For the third quarter of this year, the economists expect GDP to slow to 1.7 per cent, down from 1.8 per cent previously. Fourth quarter growth could come in at 1.5 per cent, down from the 1.7 per cent estimated in the previous survey. The growth forecast for 2016 remains unchanged at 1.8 per cent. 

“This outlook is rather optimistic,” said Credit Suisse economist Michael Wan, who expects this year to end with a growth rate of 1.3 per cent and GDP growth to weaken further to 1.1 per cent next year. 

“The pressure will remain, in fact, will intensify next year given structural risks like increasing costs and declining productivity around Singapore’s economy, which has led to several companies relocating operations at more cost effective locations. 

Unless there is sizable bounce back in the global economy or productivity levels, profit margins for companies will remain compressed.”  

Earlier this year, Japanese e-commerce giant Rakuten shut down its Singapore operations while heavy machinery manufacturer Caterpillar closed one of its facilities here axing 90 jobs. Shipping giant Maersk Line consolidated operations and moved its headquarters to Hong Kong. 

GDP grew by 2.1 per cent in the second quarter of this year, unchanged from the first quarter.

“One contributing factor for the lower forecasts could be Brexit concerns, which had prompted a wave of global growth forecasts. The other is the recent softness in China’s economic indicators, which suggest the deceleration is not done yet,” said Ms Selena Ling, head of Treasury Research & Strategy at OCBC Bank.

For the rest of 2016, economists expect a slight slowdown in the finance and insurance, and construction sectors, while marginal growth is forecast for the manufacturing, wholesale and retail trade sectors.
In 2016, economists expect the manufacturing sector to expand 0.7 per cent, up from flat growth in the June survey. Wholesale and retail trade is now expected to grow by 2.1 per cent this year, marginally up from the 2 per cent expected in the previous survey. 

On the other hand, growth in the finance and insurance industry is expected to slow to 2 per cent, down from 2.9 per cent, while the construction sector was revised downward to 3 per cent, from 3.3 per cent.

“I am looking for a stabilisation rather than strong recovery for manufacturing in the second half of the year. Financial services momentum had also slowed substantially in the second quarter, so expectations are more cautious going ahead. These headwinds and economic drag could spill over into next year, hence the growing caution over the 2017 outlook, at least for the first half,” said Ms Ling.

On Wednesday (Sept 7), the economists in the survey also adjusted their headline and core inflation forecast for this year to -0.5 per cent and 1 per cent respectively, compared with -0.4 per cent and 0.8 per cent in the previous survey. For next year, CPI-All Items and MAS Core Inflation are expected to come in at 1 per cent and 1.4 per cent respectively.