Economists maintain view of moderated 2018 growth after forecast-beating 2017

United Overseas Bank raised its 2018 GDP growth forecast to 2.8 per cent from 2.5 per cent, following the release of the official GDP numbers on Feb 14, 2018. PHOTO: BLOOMBERG

SINGAPORE - Economists in Singapore kept to their expectations for slightly slower growth in 2018 and for a tightening of monetary policy after official figures on Wednesday (Feb 14) placed 2017 gross domestic product growth at a higher-than-expected 3.6 per cent.

United Overseas Bank raised its 2018 GDP growth forecast to 2.8 per cent from 2.5 per cent following Wednesday's release of the official GDP numbers. But it said that it was still cautious, on the belief that semiconductor sales growth had peaked in 2017 and could slow down manufacturing growth for the year ahead.

"Moreover, risks in the horizon include potential trade protectionist measures from the US and upside inflationary surprises that could cause the Federal Reserve to be more hawkish," the bank wrote in a report.

DBS economist Irvin Seah kept to his forecast of economic growth moderating to 3 per cent in 2018, when the main engine of growth is expected to switch from manufacturing to services.

Mr Seah expects the manufacturing sector to cool with normalising global economic conditions as well as an easing in semiconductor demand and a sparse pipeline for new smartphone products.

The service sector, however, will benefit from a positive spillover from global recovery into the domestic sector, as well as an improving external environment, he said.

Considering the strong economic growth and a bottoming out of the labour market, the Monetary Authority of Singapore (MAS) this year could end the neutral stance that it has taken since April 2016, Mr Seah added.

OCBC Bank also maintained its forecast of 2 to 4 per cent GDP growth for 2018, although it noted that potential policy tightening risks bear watching.

OCBC economist Selena Ling highlighted that possible tax changes, such as a hike in the goods and services tax, could be announced at this year's national Budget.

Coupled with a stronger domestic growth outlook, this could accelerate inflationary expectations, and led MAS to shift its monetary policy settings from its current neutral stance to a slight appreciation bias, Ms Ling said.

The Ministry of Trade and Industry on Wednesday reported that Singapore's economy expanded by 3.6 per cent in 2017, beating an earlier forecast of 3.5 per cent, which in itself was already more than double initial predictions.

Government forecasters now expect 2018 growth to fall slightly above the middle of the predicted range of 1.5 to 3.5 per cent.

Also on Wednesday, trade promotion agency International Enterprise Singapore reported that non-oil domestic exports (NODX) grew 8.8 per cent in 2017. The agency now expects NODX to grow between 1 and 3 per cent in 2018.

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