Economists hold on to 2018 growth forecast of 3.2% for Singapore: MAS survey

Economists hold on to 2018 growth forecast of 3.2% for Singapore: MAS survey

SINGAPORE: Private-sector economists have maintained their growth forecast for the Singapore economy this year at 3.2 per cent though downside risks including trade protectionism continued to loom large, the latest quarterly survey from the Monetary Authority of Singapore (MAS) showed on Wednesday (Sep 5). 

This forecast falls within the Government’s estimates for full-year gross domestic product (GDP) to come in between 2.5 and 3.5 per cent. Official data released last month showed second-quarter GDP coming in at a slightly better-than-expected 3.9 per cent from a year ago. 

Compared to the last survey in June, the outlook for some economic indicators has brightened. 

For one, experts expect the manufacturing sector to remain a key driver of the economy, with full-year growth estimated to be 7.6 per cent – a significant upgrade from the previous survey’s 5.3 per cent. 

This comes as the sector, which accounts for one fifth of the economy, beat expectations to grow 10.2 per cent in the second quarter. 

“Manufacturing continues to surprise to the upside with external demand remaining pretty firm,” said Standard Chartered economist Jonathan Koh. 

There was also more optimism when it comes to growth in accommodation and food services. The sector is tipped to grow 2.9 per cent for the full year, compared to 2.2 per cent in the previous poll. 

The growth outlook for private consumption also got bumped up to 2.8 per cent from 2.2 per cent. 

“Private consumption may help to contribute to growth given that the labour market has improved and we are seeing real wage growth picking up. That will help to support spending,” said Mr Koh. 

On the other hand, economists maintained or downgraded their 2018 forecasts for indicators, such as finance and insurance, construction, wholesale and retail trade, and non-oil domestic exports. 

Growth expectations for the construction sector saw the biggest downward revision, with economists forecasting a contraction of 4.2 per cent. The previous survey flagged a decline of 2.1 per cent. 

CIMB Private Bank economist Song Seng Wun said: “Most of (the economists) started the year with cautious optimism based on public sector projects being brought forward and hopes for an acceleration in private sector works.” 

“But so far, the numbers have proven to be weaker than expected,” he added. The construction sector contracted 4.6 per cent year-on-year in the second quarter, according to official data. 

Meanwhile, the MAS survey showed forecasts for both headline and core inflation in 2018 to be at 0.7 and 1.7 per cent, respectively. 

On the labour front, economists expect the unemployment rate to be at 2.1 per cent at year-end, unchanged from the previous survey. 


Among the 23 economists polled, trade protectionism remained as the biggest downside risk for Singapore’s economy. 

It was cited by 89 per cent of respondents, ticking up from 84 per cent in the June survey, with further escalation of trade rhetoric by the US and its trading partners, as well as the implementation of announced tariffs, causing concern. 

While the effects of tit-for-tat tariffs between the US and China have not been reflected in broader economic data thus far, the risk of policy missteps has risen amid fears that trade tensions could be here to stay longer than expected, said Mr Song. 

READ: With the world "moving a little closer" to a trade war, what’s the impact on Singapore?

There were also growing worries about weaker external growth on the back of tightening liquidity conditions in emerging markets. This was flagged by 42 per cent of economists polled by MAS, a big jump from 11 per cent previously. 

Meanwhile, the respondents that highlighted slower growth in China as a downside risk also increased to 37 per cent, from 21 per cent, on the back of tightening credit conditions. 

“There are signs that China’s growth has started to soften and policymakers have begun moving to a more neutral stance,” said Mr Koh, referring to recent moves such as the Chinese central bank cutting reserve requirements for lenders. 

“Given how China is a huge driver of exports in the region, any further slowdown will definitely impact growth,” he added.

Economists have also become less optimistic about the domestic property market following the announcement of fresh cooling measures in early-July. Just 26 per cent of the economists surveyed cited it as a possible upside factor, compared to 47 per cent in the June survey. 

Looking ahead to 2019, experts surveyed maintained their expectations for overall GDP growth to ease to 2.7 per cent.

Source: CNA/sk(cy)