Govt may trim growth forecast for this year

But growth momentum not expected to slide any further in second half of year: MAS

Skyline of the Singapore Central Business District (CBD).
Skyline of the Singapore Central Business District (CBD).ST PHOTO: ALPHONSUS CHERN

Singapore's official economic growth forecast for this year may be trimmed after a weaker showing in the first half of the year threw up fresh uncertainties.

The Government said yesterday that it was reviewing the growth forecast of 2 to 4 per cent, although it does not expect growth momentum to slide any further in the second half, given the largely intact global recovery and resilient sectors of the local economy.

This year's outlook dimmed when the economy grew only 1.7 per cent in the second quarter compared with the same quarter last year, and shrank 4.6 per cent quarter-on-quarter.

OCBC economist Selena Ling said: "The new range may be 2 to 3 per cent, or 1.5 to 2.5 per cent if MAS wants to be extra cautious. All signs are suggesting that the second quarter could be the bottom (of decline)."

Monetary Authority of Singapore (MAS) managing director Ravi Menon warned that global risks have grown with the fallout from the Greek debt crisis, a slowdown in China and financial market jitters in Asia ahead of expected interest rate hikes in the United States this year.

"But the growth momentum is not expected to deteriorate further in the second half. Global and regional economic recovery remains broadly intact, and this should provide support for Singapore's outward-oriented sectors," Mr Menon added at a media conference on the MAS' latest annual report yesterday.

And despite seven straight months of negative headline inflation, this does not mean that deflation - a potentially dangerous economic ailment - is present, Mr Menon stressed.

Core inflation, which strips out private transport and accommodation costs, will be in the lower half of a 0.5 to 1.5 per cent range this year, but may gradually rise from the fourth quarter once the impact of oil price drops and budget measures to help households wears off.

In the coming months, sectors such as construction and services should stay resilient, with financial services expected to remain a key growth driver.

Financial services grew 7.7 per cent year-on-year in 2014, the annual report showed, more than doubling the overall economic growth of 2.9 per cent in the same period.

The growth came as assets under management in Singapore rose 30 per cent from $1.8 trillion in 2013 to a record high of more than $2.3 trillion last year.

While financial services firms continue to grow, it will take time to see further job growth for Singaporeans in this industry as efforts to build skills take a while.

On property cooling measures, Mr Menon said it was "still premature" to consider removing them.

He said "property prices have softened somewhat" but "in the context of the price increase that occurred - 60 per cent over three years - the softening we've seen is really not all that much".

A version of this article appeared in the print edition of The Straits Times on July 22, 2015, with the headline 'Govt may trim growth forecast for this year'. Print Edition | Subscribe