Better global outlook may put some shine on Singapore’s GDP
Reuters file photo
SINGAPORE — Singapore’s economic growth next year is expected to “remain firm”, though it could moderate slightly from this year, the Monetary Authority of Singapore (MAS) said in its Macroeconomic Review on Friday (Oct 27).
The Gross Domestic Product (GDP) for Singapore this year is expected to come in at the upper half of the 2–3 per cent forecast range, higher than the 2 per cent growth registered last year. This could be attributed to positive spillover effects from the global economy, with global growth this year projected to perform better than last year.
Some economists have the view that the performance for this year and next year could be even better than expected.
CIMB’s economist Song Seng Wun said: “I am positive because I believe that the growth from the tech cycle will probably still contribute to growth at a faster rate than what the consensus is expecting. The chips sector is undergoing a super cycle, which could see an upside surprise, to be maintained into 2018.”
The broadening in growth from external-oriented sectors should filter down to the domestic economy, which in turn should lead to stronger contribution, Mr Song said. He added that the external environment continues to surprise on the upside, and this could help lift Singapore’s economy into 2018, with Europe set to continue to expand and the United States looking like its economy is still chugging along.
Ms Selena Ling, head of treasury research and strategy at OCBC Bank, said: “Singapore’s growth looks to be slightly moderating, albeit more balanced going into 2018.” Manufacturing, especially electronics, should see some pullback in the quarters ahead as inventory restocking slows.
However, the sustained growth in consumer and corporate final demand should provide some resilience to the global tech cycle, she added.
For this year and next year, Mr Song expects Singapore’s growth to perform at around 3.5 per cent, supported by improvements in external demand and growth contributions from services. Ms Ling expects growth outcome to come in around the 3 per cent handle, with a possible 2 to 4 per cent growth range for GDP next year.
In its review on Friday, the MAS said: “The global growth outlook has improved, with consumer and business sentiment in the G3 economies seeing an uplift. Meanwhile, the global electronics cycle remains in an expansionary phase, with positive effects on regional trade and manufacturing.”
The central bank added that Singapore’s GDP growth is expected to pick up alongside firmer external demand. “Hence, steady growth in the global economy and the broadening of the recovery across the domestic industries should lend support to the near-term outlook.”
Global GDP is projected to rise 4.3 per cent this year, higher than the 3.9 per cent increase last year. For 2018, global growth is projected at 4.1 per cent, the MAS said.
In the review, which is released twice yearly, the central bank noted that the G3 economies — namely the United States, Japan, Eurozone — are seeing a stronger picture driven by domestic demand, while most Asian economies are seeing support from the global tech cycle upswing.
China’s growth, remains “resilient” despite the authorities’ clampdown on irregular credit flows in the financial sector.
Looking ahead, growth in the NEA-3 economies (Hong Kong, South Korea and Taiwan) will likely be anchored by sustained momentum in the IT cycle, particularly if stronger-than-expected demand for new mobile handsets materialises.
In the area of global semiconductor sales, some moderation in growth is expected next year, as the positive impulses from inventory restocking and product cycles fade.
For Singapore, domestic economic activity has strengthened and broadened since the last review in April.
“While growth in the earlier quarters was confined largely to the IT-related segments, most of the other industries have begun to see signs of a pickup,” the MAS said.
Trade-related activities here were lifted further by sustained strength in the global IT industry, while growth in segments that are more exposed to firm regional demand, such as the modern services cluster, saw support.
Going forward, the trade-related clusters are expected to continue supporting overall growth here in the coming quarters, even though the pace of expansion in the global electronics industry is likely to taper.
The modern services cluster, especially financial services, should expand moderately, in line with the recovery in the region.
The weaker sectors should see less of a drag. The marine and offshore engineering sector is expected to moderate alongside the stabilisation of global oil prices, while the construction sector should also ease into next year as public sector projects are brought forward.
