Economists keep Singapore's 2018 growth forecast at 3.2%: MAS survey

The MAS poll reflects the views of 23 economists who monitor the Singapore economy.
The MAS poll reflects the views of 23 economists who monitor the Singapore economy. PHOTO: ST FILE

SINGAPORE - Private sector economists surveyed by the Monetary Authority of Singapore (MAS) expect the economy to grow by 3.2 per cent in 2018, unchanged from two earlier polls, with a better forecast for manufacturing but also more worries over weaker external growth.

The estimate, released on Wednesday (Sept 5), is unchanged from the previous quarterly surveys in June and March, and is within the Government's forecast range of 2.5-3.5 per cent growth.

The MAS poll reflects the views of 23 economists who monitor the Singapore economy. They predicted a greater divide between trade-dependent sectors and those that rely on local demand and saw the external economy as having both upside and downside risks for Singapore.

Manufacturing is expected to grow by 7.6 per cent year on year, significantly up from their earlier prediction of 5.3 per cent in the June survey, reversing earlier fears of a slowing down in a key sector that makes up a fifth of the economy. The sector outperformed their forecast for the second quarter, growing by 10.2 per cent compared to their June prediction of 6.3 per cent.

Accommodation and food services is the only other sector tipped to perform better than previously expected, with a 2.9 per cent growth from 2.2 per cent in the previous survey.

In contrast, economists expect the construction sector to fare worse than before, shrinking by 4.2 per cent in 2018 - double the 2.1 per cent drop seen in the June poll.

They also lowered their outlook for other sectors. The finance and insurance sector is tipped to expand by 6.7 per cent, down from a 7 per cent rise in the previous survey, and the wholesale and retail trade sector to grow by 1.5 per cent from a 2 per cent increase previously.

The outlook for trade-dependent sectors follows the upside possibility of stronger global growth, driven mainly by better performance in the US economy - cited by around half of the analysts polled.

The forecast for growth in non-oil domestic exports this year was kept at a robust 5 per cent, higher than the Government's own estimate of a 2.5-3.5 per cent rise.

However, the economists were less optimistic for the domestic property market on the back of the latest cooling measures.

They also highlighted worries over faster-than-expected rate hikes by the US central bank, tightening liquidity controls in emerging markets and a slowdown in the world's second-largest economy China.

A large majority of respondents - 89 per cent - cited trade protectionism as a major risk factor, with further escalation of trade rhetoric by the US and its trading partners and the implementation of tariffs causing concern. The US imposed higher tariffs on US$50 billion of imports from China earlier this year, prompting a tit-for-tat response from China.

More economists (37 per cent) also flagged slower growth in China as a downside risk, on the back of tightening credit conditions, compared to the June survey (21 per cent).

On the outlook for inflation, economists saw overall consumer prices rising by 0.7 per cent this year, down slightly from 0.8 per cent in the June survey. In contrast, the forecast for MAS core inflation, which excludes the costs of accommodation and private road transport, rose to 1.7 per cent from 1.6 per cent previously.

Economists also stuck to their previous prediction for the unemployment rate to stand at 2.1 per cent at year end.

They expect overall economic growth of 2.7 per cent in 2019, unchanged from their June survey, with a headline inflation of 1.5 per cent.