Economists revise full-year growth forecast to 3.3%

SINGAPORE — The Republic’s economy is likely to grow at a slower pace this year than was expected three months ago, as an uneven global recovery coupled with economic restructuring at home continue to weigh on key economic sectors, a central bank survey of forecasters released yesterday showed.

Full-year growth is now expected to come in at 3.3 per cent, based on median forecasts of 22 economists surveyed by the Monetary Authority of Singapore (MAS).

This marks a downward adjustment from the 3.8 per cent expansion previously forecast in June. Expectations for third-quarter growth have also narrowed to 3.2 per cent from 3.5 per cent in the June survey.

Among economists who are concerned is DBS’ Mr Irvin Seah, who is forecasting an even lower full-year expansion at 3 per cent, due in part to a slower-than-expected recovery in the United States and Europe.

“The market has been hanging on the hopes of a recovery in the second half. We’re still on this path, but must recognise that the pace has been a lot slower than most people anticipated,” he told TODAY.

“In the US, despite the second-quarter rebound, first-half growth was very sluggish on average. And the euro zone seems to be tipping back into the doldrums again if you look at the mixed GDP figures recently,” he added.

“Singapore’s growth is still mostly externally driven. So unless their economic activities see a surprisingly strong uptick in the coming months, there may even be downside risks to the 3.3 per cent forecast.”

Singapore’s gross domestic product between April and June grew 2.4 percent from a year ago — the slowest since the first quarter of last year and a marked slowdown from the 4.8 per cent in the previous three months, as manufacturing and wholesale and retail trade saw much smaller gains.

Last month, the Ministry of Trade and Industry narrowed its full-year GDP forecast to between 2.5 and 3.5 per cent, from 2 to 4 per cent previously. Amid choppy external conditions, this trend is set to continue into the third quarter, with economists adjusting their full-year growth forecast for manufacturing to 4.2 per cent, from 5.6 per cent.

Non-oil domestic exports are flagged for a 1.1 per cent decline — a huge dip from the 4.1 per cent growth previously forecast.

The weak outlook is not surprising as Singapore faces not only external uncertainties, but also domestic constraints resulting from economic restructuring, Credit Suisse analyst Michael Wan noted.

“The impact is reflected in the electronics sector, for instance, where manufacturers have been unable to expand production partly due to a shortage of labour,” said Mr Wan, referring to the sector’s declining output and exports in recent months.

“The overall economy is still some way from firmer recovery, but I believe global demand — and hence Singapore’s growth — will pick up in a more synchronised fashion starting from 2015’s first quarter,” he added as he flagged a 5 per cent full-year growth for next year, above the median forecast of 3.7 per cent in MAS’ latest forecasters’ survey.

Barclays senior economist Leong Wai Ho is even more upbeat, expecting stronger growth this year on the back of a potential rebound in the US.

“Their leading indicators such as ISM index suggest a turning point that can come as early as this month and we should see more tech orders on the horizon for Singapore manufacturers in a US investment up-cycle,” he said.

“If we get that turning point, cost and manpower pressures will be less of a concern.”