The Republic’s economy is expected to grow by 1.4 per cent this year, according to private-sector economists who have slashed their forecast in the latest quarterly survey by the Monetary Authority of Singapore (MAS). The economists had projected growth to be 1.8 per cent in the previous survey in September.
For 2017, the 22 economists polled expect Singapore’s gross domestic product (GDP) to grow by 1.5 per cent, also down from their previous forecast of 1.8 per cent.
The MAS survey, which was released on Wednesday (Dec 14), came after weak economic data prompted the Ministry of Trade and Industry (MTI) last month to trim the top end of the official full-year growth forecast for this year by half a percentage point, with the economy now expected to grow between 1 and 1.5 per cent. MTI forecast GDP growth to come in between 1 and 3 per cent next year.
The economy grew 1.1 per cent year-on-year in the third quarter this year, slower than the previous quarter’s 2 per cent growth.
Economists told that the worse-than-expected third quarter performance was key to the downward revision in the survey.
“The third-quarter numbers came in weaker than expected and, more importantly, the numbers showed that the heavyweight of Singapore’s economy — the services sector — is slowing, which resulted in the lower forecasts for both 2016 and 2017,” said UOB economist Francis Tan.
The pessimism was also reflected in the sharp downward revisions in forecast for sectors such as wholesale and retail trade, as well as finance and insurance. Growth projection for wholesale and retail trade was cut to 0.1 per cent from 2.1 per cent in the previous survey, while the finance and insurance sector is now forecast to grow 0.5 per cent, down from the previously expected 2 per cent. Construction, another key sector, is expected to grow at a slower pace of 2.3 per cent this year, compared to the earlier forecast of 3 per cent.
Credit Suisse economist Michael Wan said the headwinds faced by these sectors, as well as weakness in domestic demand, could continue into the next year and weigh on growth prospects.
“The MAS survey showed that analysts expect things to pick up in 2017. Underlying that forecast are better global conditions, higher oil prices supporting the offshore and marine sector, steepening bond yields helping the banks — these are true, but higher global interest rates would affect households and corporates, so private consumption and investment could surprise on the downside,” he said.
Maybank Kim Eng analyst Neel Sinha said in a report issued yesterday that purse strings of Singapore consumers are tightening, citing a general decline in retail sales. This comes amid weaker visitor arrivals and cautiousness in the domestic market.
He cited two external risks for Singapore next year: Measures by regional countries to restrict capital outflow and a “possible strain” in Singapore-China relations. The analyst referred to last month’s incident where nine Singapore Armed Forces Terrex Infantry Carrier Vehicles en route to Singapore from Taiwan were detained by Hong Kong customs.
“This specific issue seems to have been resolved for now, but it brought a strong reaction from China’s Foreign Ministry,” he added.
Inflation outlook for Singapore remained dimmed, with the economists polled by MAS expecting the all items Consumer Price Index to dip 0.5 per cent for the whole of this year, unchanged from the previous survey. Core inflation, which excludes accommodation and private road transport costs, is expected to be 0.9 per cent in 2016, down from 1 per cent projected in the previous survey.