Global economies 'set to remain sluggish'

People take photos of the skyline of the central business district in Singapore, on April 27, 2016.
People take photos of the skyline of the central business district in Singapore, on April 27, 2016.PHOTO: REUTERS

Economists see tardy growth, especially for trade-dependent Asian exporters like Singapore

Asia rode out a rocky start to 2016 as concerns over slowing growth in China and lacklustre demand from developed economies weighed on growth in the first quarter.

Economists say the outlook remains overcast and there will be more sluggish growth ahead, especially for trade-dependent Asian exporters like Singapore.

A bumpy first quarter for the US economy set the tone for generally muted global growth. The world's largest economy expanded just 0.5 per cent in the first three months of the year - its slowest pace in two years - amid tumbling corporate investment and lower exports.

Euro-zone growth came in at a faster-than-expected 0.6 per cent in the first three months of the year over the preceding quarter, above expectations for an expansion of 0.4 per cent. Euro zone year-on-year growth held steady at 1.6 per cent.

This is a "promising sign" but global conditions are still expected to remain soft this year, said HSBC economist Joseph Incalcaterra.

"Indeed, we forecast growth in both the euro zone and the US to decelerate slightly in 2016, compared with 2015," he added.

Closer to home, there were signs of green shoots in regional heavyweight China, where growth came in at 6.7 per cent in the first quarter. This was in line with analysts' expectations and suggested that the country's aggressive monetary stimulus was bearing fruit.

SUSTAINED BOOST NEEDED

For Asia's growth prospects to rebound in 2016, we need to see signs of a sustained boost in consumption and business investment, which could help to reverse Asia's fortunes.

MR JOSEPH INCALCATERRA, HSBC economist

This marked a "broad-based turnaround" in China's economy, said Capital Economics economists Mark Williams and Julian Evans-Pritchard.

"Worries about structural imbalances continue to cast a shadow over medium-term prospects but the outlook for the rest of the year is much brighter," they added.

Still, concerns remain over unsustainably high levels of debt and growth fuelled by cheap credit.

Elsewhere in the region, South Korea's economic growth halved in the first three months of the year, compared with the previous quarter, on the back of poor exports and stumbling capital investment. Asia's fourth-largest economy grew 2.7 per cent during the first quarter over a year earlier - the weakest seen since the third quarter of last year.

Indonesia and Thailand are expected to release their growth figures in the middle of the month.

"For Asia's growth prospects to rebound in 2016, we need to see signs of a sustained boost in consumption and business investment, which could help to reverse Asia's fortunes," said Mr Incalcaterra.

The Singapore economy, meanwhile, grew a modest 1.8 per cent in the first quarter from a year ago, according to official advance estimates. Given the cautious global outlook, economists say prospects for the year are subdued.

"Singapore... looks set to have a comparatively difficult year. The export outlook will remain particularly difficult as tepid external demand conditions persist," Mr Andrew Wood, analyst with BMI Research, told The Straits Times.

A version of this article appeared in the print edition of The Straits Times on May 02, 2016, with the headline 'Global economies 'set to remain sluggish''. Print Edition | Subscribe