SINGAPORE: Private sector economists have maintained their full-year growth forecasts for Singapore at 3.2 per cent, although they highlighted concerns over trade protectionism and rising interest rates.
Gross domestic product (GDP) is likely to grow by 3.2 per cent this year, according to 28 respondents polled in a quarterly survey of professional forecasters conducted by the Monetary Authority of Singapore (MAS) and released on Wednesday (Jun 13). This is unchanged from the previous survey in March.
“Tightening monetary policy across the developed world, in particular by the US Federal Reserve, has led to increasing concerns over rising interest rates,” MAS said in its report. “This risk is cited by 47 per cent of respondents, up from just 17 per cent,” it added.
The Federal Open Market Committee is expected to announce its decision on the US interest rate on Wednesday (2am Singapore time) after a two-day meeting. A rate hike of another 25 basis points is widely expected, but focus will also be on the Fed's statement wording for clues on the future pace of interest rate hikes.
The Fed’s current monetary policy tightening cycle began in December 2015.
The Singapore economy grew by 4.4 per cent in the first quarter of this year, which was higher than the median forecast of 3.8 per cent reported in the March survey.
For the second quarter, the respondents expect Singapore’s economy to grow by 3.9 per cent. GDP growth for next year is projected to ease to 2.8 per cent.
The government’s forecast for 2018 GDP is 2.5 per cent to 3.5 per cent. In 2017, GDP growth was 3.6 per cent.
In its report, MAS also said that the respondents expect manufacturing, finance and insurance to do relatively well this year, compared with sectors such as construction and wholesale and retail trade.
“The global tech cycle’s impact on the electronics sector, and external growth in general, continue to be the two other most commonly cited upside risks,” MAS said.
The outlook on the property market also remains positive, MAS said.
On downside risks, the report showed, the economists highlighted that the implementation of trade tariffs by the US and subsequent responses from the affected economies.
“Global trade protectionism continues to dominate the list of potential downsides,” MAS said, adding that 84 per cent of respondents expect the escalation of trade frictions to present a significant downside risk.
Meanwhile, the possibility of a slowdown in China from domestic stresses is comparatively more subdued, with 21 per cent of respondents highlighting it as a key risk, down from 53 per cent previously.
The forecast for headline inflation for the full year is expected at 0.8 per cent, down from 1.0 per cent in the March survey. The forecast for MAS core inflation remains at 1.6 per cent for the whole year.