Economists cut growth forecast for 2017 to 1.8%, down from 2.1%

The revised growth is markedly slower than the previous median 2.1 per cent forecast made in June.
The revised growth is markedly slower than the previous median 2.1 per cent forecast made in June.PHOTO: ST FILE

Full-year growth estimate for this year unchanged at 1.8% in survey of 22 economists, analysts by MAS

Singapore's economy outdid economists' estimates last quarter to grow slightly faster than expected, but few expect a repeat performance, a survey by the Monetary Authority of Singapore (MAS) shows.

The 22 economists and analysts responding to the MAS poll now expect the local economy to grow 1.8 per cent for all of next year, markedly slower than their median 2.1 per cent forecast made in June.

Singapore's official growth forecast for next year is not out yet.

The economists also took a more cautious outlook for the second half of this year even as the economy expanded by 2.1 per cent in the three months to June 30, over the same period last year - slightly above the median forecast for 2 per cent growth reported in the June survey.

Respondents left their full-year growth forecast for this year unchanged at 1.8 per cent growth, as the Singapore economy is now expected to grow by 1.7 per cent in the current three months to Sept 30, just below the June forecast for 1.8 per cent growth in the third quarter. The economy is then expected to ease a little to grow by 1.5 per cent in the three months to Dec 31, less than the 1.7 per cent growth forecast in June.

Economists told The Straits Times that the lower growth profile for Singapore next year is simply a reflection of its vulnerability to weakening overseas demand.

Long-term economic growth is also a struggle as investment spending has fallen despite many advanced economies touting ultra-low interest rates.

As a result, future output will not get much of a boost and this "puts greater downward pressure on Singapore's trade and production nexus", said ANZ economist Weiwen Ng.

Economists told The Straits Times that the lower growth profile for Singapore next year is simply a reflection of its vulnerability to weakening overseas demand.

Long-term economic growth is also a struggle as investment spending has fallen despite many advanced economies touting ultra-low interest rates.

As a result, future output will not get much of a boost and this "puts greater downward pressure on Singapore's trade and production nexus", said ANZ economist Weiwen Ng.

Another notable change reflected in the MAS survey was the marginally higher core inflation expectations for this year after a long period of stagnation of consumer prices.

Full-year core inflation - which excludes accommodation and transport costs - is expected to come in at 1 per cent. The previous survey put core inflation at 0.8 per cent.

Mr Ng said: "For Singapore, low growth is not necessarily deflationary. In spite of rising retrenchments, wage growth has remained firm and has not compressed significantly despite the current subdued environment."

If core inflation continues to pick up at a healthy pace, the chance of the central bank easing monetary policy when it next meets in October is low, economists noted.

The survey forecast said as much, with the Singapore dollar tipped to continue to strengthen against the greenback and end the year at S$1.38 to one US dollar. The previous survey tipped an exchange rate of S$1.40 to one US dollar.

On the labour market, respondents expect the unemployment rate to climb to 2.2 per cent by the end of the year, a tad above the 2.1 per cent rate forecast previously.

A version of this article appeared in the print edition of The Straits Times on September 08, 2016, with the headline 'Economists cut growth forecast for 2017 to 1.8%, down from 2.1%'. Print Edition | Subscribe