SINGAPORE: Analysts are less optimistic about Singapore’s economy, cutting their growth forecast for 2016 to 1.9 per cent from 2.2 per cent, according to the latest quarterly survey by the Monetary Authority of Singapore (MAS) released on Wednesday (Mar 16).
That compares with the official Gross Domestic Product (GDP) forecast by the Ministry of Trade and Industry (MTI) of 1 per cent to 3 per cent growth.
While in line with the Government's forecast, it would be Singapore's weakest annual growth since 2009.
Said Mr Richard Jerram, chief economist at the Bank of Singapore; "If they can make 2 per cent this year, that's probably not a bad achievement. If you think the housing market is struggling, and Chinese demand is weak, the oil and gas sector - which is quite a big export sector - is also doing quite badly. I think in that environment, if you can grow 2 per cent, it's actually a decent result."
Manufacturing is now expected to contract by 2.7 per cent, worse than the 1.2 per cent contraction forecast in the previous survey. The analysts are also more pessimistic about the finance and insurance sector, with 3.6 per cent growth forecast for 2016, down from the 5.9 per cent expansion predicted in the December survey.
However, the analysts are more optimistic about the construction sector, with 2.6 per cent growth forecast, up from 1.2 per cent in the previous survey.
Looking further ahead, the analysts expect GDP to expand by 2.5 per cent in 2017.
NEGATIVE HEADLINE INFLATION FOR 2 STRAIGHT YEARS
The analysts have also cut their expectations for 2016 inflation, with the Consumer Price Index-All Items expected to come in at -0.2 per cent. That compares with expectations of an increase of 0.5 per cent in the December survey.
Core inflation, which excludes accommodation and private road transport costs, is forecast at 0.8 per cent, down from the 1 per cent in the previous survey.
The official forecast for headline inflation this year is -1 per cent to 0 per cent, with core inflation expected to come in at 0.5 per cent to 1.5 per cent.
The survey collated the views of 24 analysts who closely monitor the Singapore economy.
If the forecasts are correct, it will be the first time Singapore sees negative headline inflation for two straight years, said Mr Irvin Seah, a senior economist at DBS Bank.
He noted: "In fact, last year's negative inflation of 0.5 per cent is already a multi-year low. Apart from the fact that this is mainly because of oil. I think global fundamentals are also very weak, hence there's a lack of demand side pressure for prices to be high.
"That being said, Singapore's domestic price will remain fairly high because of rental cost of living, (for example), and that explains why core inflation continues to remain above zero."
DBS said the slower growth outlook could prompt the MAS to ease its exchange rate policy stance to one of zero appreciation of the Singapore Dollar Nominal Effective Exchange Rate (S$NEER) when it issues its next monetary policy statement in April.