Singapore’s 2018 economic growth likely to 'moderate' from this year: MAS

Singapore’s 2018 economic growth likely to 'moderate' from this year: MAS

The Republic's economic growth is expected to remain firm in 2018 though expansion could moderate slightly from this year, the Monetary Authority of Singapore (MAS) said in its latest macroeconomic review released on Friday (Oct 27).

SINGAPORE: The Republic's economic growth is expected to remain firm in 2018 though expansion could moderate slightly from this year, the Monetary Authority of Singapore (MAS) said in its latest macroeconomic review released on Friday (Oct 27).

The central bank expects Singapore's gross domestic product (GDP) to come in at the upper half of the 2 to 3 per cent forecast range this year. For 2018, the economy is likely to expand at a steady, but slightly reduced pace, amid steady global growth and a broadening recovery across domestic industries.

In the biannual report, which contains the central bank’s analysis of Singapore’s economic performance and outlook, MAS also said it expects current uneven sectoral growth to “dissipate in 2018”.


Over the past two quarters, MAS noted that recovery in the domestic economy has picked up in both pace and breadth.

Gross domestic product (GDP) grew an average of 4.4 per cent on a quarter-on-quarter seasonally adjusted basis in the second and third quarters – a turnaround from the contraction over the first three months of 2017.

This was largely underpinned by trade-related sectors, which have been spurred by continued strength in the global electronics cycle.

While growth in the earlier quarters was largely confined to IT-related segments, most of the other industries have begun to show signs of pick-up, MAS said.

Within the modern services and domestic-oriented clusters, industry segments such as financial services, retail as well as information and communications, have improved over the last six months, signalling a broadening of economic recovery.

The central bank noted that this convergence in sectoral performance is likely to continue, resulting in a “smaller degree of growth dispersion across sectors” in 2018.

“Sectoral outcomes have been relatively uneven in 2017 as a whole, with strong performers in the IT-related industries helping to shore up weakness in construction and oil-related activities. This divergence is expected to narrow going forward,” the report said.

For one, growth momentum in IT-related segments is expected to moderate as the maturing of the global tech cycle could result in some consolidation in the growth of manufacturing production.

However, a “broad swathe of average-performing industries” will likely fare better in the quarters ahead even as growth may remain modest, MAS said.

Industry segments, such as financial services and retail, should stand to benefit from the improvement in the overall business climate, as well as firmer regional trade and growth.

It also expects the marine and offshore engineering sector to “exert less of a drag on growth” in 2018. While structural trends, such as the rise of US shale production, will cap upsides in the oil industry, supple-demand imbalances are slowly being resolved in favour of a more neutral outlook for manufacturers in this sector, MAS said.

Meanwhile, the construction sector could see a turnaround in 2018, albeit modestly, on the back of support from the S$1.4 billion worth of public sector contracts brought forward and stream of progress payments from earlier rail-related contracts awarded in 2016.


Mr Edward Lee, regional head of research for Southeast Asia at Standard Chartered Bank, said 2017 is shaping up to be a “good year” for the Singapore economy.

He expects third-quarter GDP growth to be revised up to 5 per cent year-on-year, from the earlier estimate of 4.6 per cent. For the full year, the local economy may expand by 2.6 per cent.

However, this pace of expansion is unlikely to continue into 2018, given the expected moderation in electronics growth and the likelihood of a pullback in China’s economic growth.

“Much of the export growth this year has been driven by China. We have the view of a possible pullback in 2018 because China over-boosted its growth this year given it being an important political year. We think it may focus more on deleveraging in the quarters ahead,” Mr Lee told Channel NewsAsia.

He added that while the domestic economy is stabilising, certain sectors such as construction continue to flounder. However, the moderation in growth "will be nothing sinister", said Mr Lee who expects Singapore’s full-year GDP growth in 2018 to be around 2.3 per cent.

For OCBC’s head of treasury research and strategy Selena Ling, a 2 to 4 per cent growth range for 2018 could be plausible given the economy's 2017 GDP outcome, which should "come in around the 3 per cent handle".

Ms Ling added that “the window for a normalisation of monetary policy in April or October 2018 remains open, depending on the evolution of economic developments and their impact on growth and inflation outlook".

Earlier this month, the central bank, in line with expectations, maintained its current neutral appreciation stance for the Singapore dollar nominal effective exchange rate (S$NEER). 

Core inflation – a major policy consideration for the MAS – is projected to come in at about 1.5 per cent in 2017, and average 1 to 2 per cent next year, it said.

“While the economy has emerged from the disinflationary zone of the past two years, there is as yet little evidence that underlying price pressures will accelerate in the near term," according to the report.

"External sources of inflation are expected to be relatively benign, while effective cost pressures in the domestic economy should be restrained.”

Meanwhile, Singapore’s headline inflation is expected to be about 0.5 per cent in 2017 and remain within the range of 0 to 1 per cent in 2018, MAS said. 

Source: CNA/sk