SINGAPORE: Private sector economists expect the Republic’s economy to grow by 1.8 per cent for 2016, according to a quarterly survey released by the Monetary Authority of Singapore (MAS) on Wednesday (Jun 15). This is slightly below the 1.9 per cent that was earlier forecast in the previous survey in March.
Singapore’s gross domestic product (GDP) growth in the first quarter, however, was higher than the median forecast of 1.6 per cent in the previous survey. The economy expanded by 1.8 per cent during the quarter.
In 2016, economists expect the growth in the manufacturing sector to be flat – up from -2.7 per cent in the previous survey, while wholesale and retail trade is now expected to grow by 2 per cent this year, down from the 3.9 per cent growth. The finance and insurance industry is expected to grow 2.9 per cent, down from 3.6 per cent, while the construction sector was revised upwards to 3.3 per cent, from 2.6 per cent.
For the second quarter of 2016, survey respondents said they expect GDP to expand by 2 per cent.
INFLATION LIKELY TO SLOW
Inflation is expected to slow, with the economists forecasting the consumer price index (CPI) to come in at -0.4 per cent for the full year, down from the -0.2 per cent dip forecast in March. Core inflation – which excludes accommodation and car prices – is expected at 0.8 per cent, unchanged from the previous survey.
Looking ahead, economists said they expect the unemployment rate to be 2.1 per cent at year-end. GDP is expected to come in at 2.1 per cent in 2017, while headline inflation and MAS core inflation are forecast to be 1.0 per cent and 1.2 per cent respectively.
Said Mr Jeff Ng, an economist for Southeast Asia at Standard Chartered Bank: “Overall, we should see modest growth in the manufacturing sector but that’s also helped by the diversified structure of the sector.
“For the services sectors, it does look like headwinds are gathering. Last year, growth was still resilient despite overall headline growth coming down. And I think the concern is that with services now making up a bigger proportion of the economy than before, with the sector slowing down, it may signal more concerns for the economy going forward.”
“But having said that, there are still pockets within the services sector that will continue to experience modest growth; in particular, I think the domestically-oriented sectors should continue to help to support GDP growth,” he added.
Economists added that growth is expected to remain weak in the second half of the year. They cited a lacklustre external environment, as well as key downside risks they are looking out for.
Mr Francis Tan, an economist at United Overseas Bank, said: “Even though we have been seeing some recovery in the economy of the US, right now the whole world is very much looking into whether Britain will leave the Euro through the EU referendum.
“What that means is it may cause a lot more volatility in global growth coming up. Naturally the export-driven sectors in Singapore will continue to be affected for the rest of this year. What I’m more afraid of right now is that that spills over into the domestic segments, especially the services sector.”
The MAS Survey of Professional Forecasters is conducted every quarter after the release of detailed economic data for the preceding three months. The median forecasts in the latest report were based on the estimates of 27 economists, MAS said.