SINGAPORE - Business investments in Singapore could fall by 3.5 per cent in 2017 amid disappointing trade activity, according to the Institute of Chartered Accountants in England and Wales (ICAEW).
But it is likely to see a fairly rapid rebound in 2018 as regional trade gathers more steam, ICAEW added in its latest economic insight report on the region released on Monday (Sept 5).
Singapore's economy has been running at a sub-trend pace of growth for the past few quarters, reflecting weak regional trade and a correction in the housing market. As an export-dependent economy, the appreciation of the Singapore dollar this year will add to the challenges facing the economy, notably in the manufacturing sector, said the report.
However, service sector activity, which accounts for two thirds of the economy, remains more buoyant and economic growth is forecast to accelerate modestly in 2017 as global trade gradually improves.
"Singapore is well placed for financing investment spending in the years ahead," said Mr Mark Billington, regional director, ICAEW South-east Asia.
"In order to support Singapore's investment and growth in the medium term, the government will need to ensure that credit supply remains sustainable and is channelled to the most productive sectors."
Meanwhile, investment growth is expected to accelerate in Indonesia and Malaysia, and ease only modestly in Vietnam, said the report. It noted that economic prospects for the region, as a whole, remain positive, with a steady recovery in world trade supporting export prospects and public investment playing a key role in several economies.
However, strong trade and financial ties with China means the latter remains a crucial driver of fortunes in the Asean region: a sudden slowdown in China would have a major impact in Asean.
"Firms will need to maintain a solid pace of capital expenditure to ensure business opportunities are not lost," said Ms Priyanka Kishore, ICAEW economic adviser and Oxford Economics lead economist, noting that they will need a "ready supply of finance at a cost that makes investment projects financially viable".