Analysts expect strong growth, fret over protectionism

Economists expect the economy to grow 3.2 per cent this year.
Economists expect the economy to grow 3.2 per cent this year.PHOTO: ST FILE
VISHNU VARATHAN
VISHNU VARATHAN
CHUA HAK BIN
CHUA HAK BIN

3.2% growth forecast for 2018 most upbeat in recent years, but trade war worries rising

Private-sector economists have raised their growth forecast for the year, in what has been their most upbeat prediction since late 2014.

At the same time, they flagged the threat of trade protectionism as their biggest worry, which could cast a shadow on future prospects.

Economists expect the economy to grow 3.2 per cent this year, according to a Monetary Authority of Singapore (MAS) quarterly survey released yesterday. This is up from their tip of a full-year expansion of 3 per cent made in the December survey.

They expect growth to moderate to 2.8 per cent next year.

The latest 2018 prediction is within the range of 1.5 per cent to 3.5 per cent estimated by the Ministry of Trade and Industry, which tips growth to come in "slightly above the middle".

The MAS survey, which was conducted in February, recorded responses from 24 economists and analysts.

Mizuho Bank economist Vishnu Varathan said: "For one thing, the sense is that the overall global economic recovery momentum has sustained."

SUSTAINED MOMENTUM

For one thing, the sense is that the overall global economic recovery momentum has sustained.

MIZUHO BANK ECONOMIST VISHNU VARATHAN, on one of the aspects for the growth forecast.


TIT-FOR-TAT FEARS

The danger is a full-blown trade war, if Trump starts targeting China with measures which will inevitably invite retaliation.

MAYBANK KIM ENG ECONOMIST CHUA HAK BIN, on a possible consequence of US President Donald Trump's recent tariffs, though he added that the tariffs will have a limited impact on Asia's trade boom. 

He cited Japan's eight consecutive quarters of growth, the broadening euro zone pick-up and an upbeat growth outlook for the United States.

Since the last survey, economists have grown more optimistic about the finance and insurance, wholesale and retail trade, and accommodation and food services sectors, as well as private consumption.

But they are more pessimistic about manufacturing and non-oil domestic exports. Expectations for construction remain unchanged.

"Manufacturing growth will likely lose some steam, given the strong surge last year," said Maybank Kim Eng economist Chua Hak Bin.

Though growth in manufacturing is now expected to come in lower, the sector remains "a pillar of growth", noted United Overseas Bank economist Francis Tan.

The top potential upside for the economy, cited by 47 per cent of respondents, is that electronics will outperform expectations.

Other potential upsides include the external growth outlook and property market performance.

Trade protectionism is the main risk, cited by 88 per cent of respondents - up from just 40 per cent in the December survey.

Though US President Donald Trump's recent tariffs will have a limited impact on Asia's trade boom, "the danger is a full-blown trade war, if Trump starts targeting China with measures which will inevitably invite retaliation", said Dr Chua.

But Mr Tan feels too much weight has been placed on Mr Trump's moves. He noted that Singapore's exports to the US are "not huge" as a share of total exports, and the country's export dependence on the US has fallen.

The next largest worry was a slowdown in China's economy, with financial sector uncertainty a distant third.

Economists expect headline inflation of 0.4 per cent in this quarter and core inflation - which excludes accommodation and private road transport - of 1.5 per cent.

A version of this article appeared in the print edition of The Straits Times on March 15, 2018, with the headline 'Analysts expect strong growth, fret over protectionism'. Print Edition | Subscribe