'We don't expect a recession': Economists react to GDP data

Skyline of the Central Business District in Singapore.
Skyline of the Central Business District in Singapore.ST PHOTO: JAMIE KOH

SINGAPORE - The Government released its final figures on Wednesday (Feb 24) showing the Singapore economy grew 2 per cent in 2015, the weakest rate of growth since 2009.

This was down slightly from the Government's earlier estimates of 2.1 per cent, and also slower than 2014's 3.3 per cent.

The Ministry of Trade & Industry maintained its forecast for growth this year of 1-3 per cent while noting the challenges and downside risks to Singapore's economic outlook.

Here are some quick reactions from economists:

OCBC Bank's head of Treasury research & strategy, Selena Ling: 2016 growth prospects more challenging:

There was no change to the official 2016 growth outlook at 1-3 per cent with the caveat that it is "barring the full materialisation of downside risks", with services sectors like finance and insurance and wholesale trade likely to support growth in the face of manufacturing weakness.


However, the accompanying elaboration of the challenges, especially the downside risks in the global economic outlook, suggests some inherent dovishness. Note four domestic drags were cited, namely weak external demand weighing on exports, risks of lower oil prices on the marine and offshore segment as well as supporting precision engineering industry, weakening momentum in construction, and manpower constraints in labour-intensive sectors like food services.

Our 2016 GDP growth forecast remains at 2 per cent, assuming that a step-down in first quarter 2016 momentum will stabilise on a year-on-year basis from the second quarter onwards.

The sluggish growth and inflation dynamics continue to slightly push open the policy door for stimulus, be it on the fiscal or monetary front.

We expect a more supportive tone to be set at the upcoming 2016 Budget where a neutral to a slightly modest budget deficit position could be in store, with the focus on retooling the Singapore economy and preparing the businesses and workforce for the challenges of the future economy.

The monetary policy setting, on the other hand, may be more sensitised to the global environment, capital flows and market sentiments pending the manoeuvrings of major central bank including in the US, Euro zone, Japan and China.

UOB Global Economics and Markets Research: Recession not expected:

The Government maintains its 1-3 per cent growth outlook for 2016 while we maintain our 2.7 per cent growth forecast.

Growth prospects remain challenging in 2016, particularly in the first half of the year. However, we remain optimistic that there could be some pickup in external sectors in the second half-year as the economic conditions in the US continue on an improving path, while some basis effects from the low base in 2015 will provide some support for growth.

We do not think that the recent releases of weak economic numbers warrant an easing in monetary policy in the upcoming April policy meeting as core inflation outlook remains intact. While growth may be weak, particularly in the first half-year, we are also not expecting an economic recession.

SIM Global Education senior lecturer Dr Tan Khay Boon: 

The 2 per cent growth rate for 2015 is well within the official forecasted growth rate of 1to 3 per cent but it is among the slowest growth rates in the non-recession years of Singapore.  The poor performance in the goods producing industries is saved by the better performance of the services producing industries which helps to avoid a recession in 2015.  But the situation appears to be increasingly challenging.

The weakness in the manufacturing sector is no longer confined to the electronics cluster.  It has spread to the transport engineering cluster, especially the marine & offshore engineering segment due to the depressed oil prices.   While full employment continues to render support to a good performance in the wholesale & retail trade segment of the services sector, the possibility of interest rate hike, stock market volatility and capital flight may dampen the performance of the finance & insurance segment.