S'pore growth momentum in 2013 should continue into 2014, say economists
- POSTED: 24 Dec 2013 17:05
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Economists said the growth momentum seen in second half of 2013 should carry through into 2014, helping the Singapore economy grow by an estimated 3.5 to 4 per cent or more.
SINGAPORE: Economists said the growth momentum seen in the second half of 2013 should carry through into 2014, helping the Singapore economy grow by an estimated 3.5 to 4 per cent or more.
Domestically, however, thorny issues like rising labour cost and inflation will continue to pose challenges for businesses.
Economists said the main catalyst for Singapore's growth in 2014 is likely to be an improving demand from G3 countries, which include the US, the European Union and Japan.
They expect Singapore's GDP to grow at or slightly above the upper end of the government's forecast of between 2 and 4 per cent.
Francis Tan, economist at United Overseas Bank, said: "Over in the US, which we are most optimistic about, we think the US consumption seems to be on the rise, the home sales are doing well and unemployment rate has been falling as well, with people gainfully employed. That will further stimulate private consumption expenditure in the US, which will generate the final demand for goods that are produced in Asia, particularly from China to the US.
“And Singapore as a producer for intermediate products for China's final assembly -- that would naturally benefit our economy in terms of exports. We think that exports next year will be coming up quite strongly. In fact for 2014, we think NODX (non-oil domestic exports) should come up to 7 per cent growth, compared to this year."
Apart from trade, economists also expect continued recovery in the electronics sector, while the construction and financial services sectors are likely to remain fairly robust next year.
Singapore's economy, they said, will grow but the ride could be bumpy.
And one key support factor to watch for is the pace of growth in China.
Steve Brice, chief investment strategist at Standard Chartered Bank, said: "Chinese authorities still, we believe, are going to clamp down on credit to a significant extent. They will probably use any strength in the external sector to accelerate that process and manage the credit creation that we have seen. We don't see growth accelerating dramatically in China. So, that could be one area of caution."
Economists said the prospects are looking somewhat brighter in terms of the external environment. But some of the key challenges for Singapore next year could come from within.
The restructuring of the economy and tight labour market are expected to drive cost increases, which more likely will be passed on to consumers.
Singapore's unemployment rate has fallen to 1.8 per cent in the third quarter of 2013.
Vishnu Varathan, senior economist at Mizuho Bank, said: "Inflation, one would have assumed was going to ease further, but inflation is going to be pretty patchy. You are going to have a variable effect from COE prices coming through, after the shift in policy. We don't expect this to be a very significant mover of COE per se, but given that property prices are perhaps not cooling as quickly, we do think inflation would be on the firmer side of 2 to 3 per cent range."
Barring any unforeseen events, economists said the Monetary Authority of Singapore will likely stand pat on its current policy of allowing for a modest and gradual appreciation of the Sing dollar in its April review to keep inflation in check.