SINGAPORE - Private sector economists have raised their outlook for Singapore's economy this year, after growth in the third quarter came in slightly better than expected, and buoyed by stronger hopes for electronics-led manufacturing.
They now expect gross domestic product to increase by 0.7 per cent in 2019, up from 0.6 per cent in the previous survey in September, according to the latest quarterly poll of professional forecasters by the Monetary Authority of Singapore released on Wednesday (Dec 11).
This comes on the back of the Ministry of Trade and Industry (MTI) announcing last month that the economy is expected to grow by 0.5 to 1 per cent this year, when it raised the lower end in the previous forecast range of 0 to 1 per cent growth.
The Singapore economy expanded by 0.5 per cent in the third quarter compared with the same period last year, beating the estimate of 0.3 per cent projected by private economists in the September survey.
Economists polled now say they expect growth in the fourth quarter to come in at 1 per cent year on year.
They tip growth to rise to 1.5 per cent next year, down slightly from 1.6 per cent previously. However, the range of forecasts has tightened to 1.5 to 1.9 per cent, from 1 to 1.9 per cent. The Government's own forecast is for 0.5 to 2.5 per cent growth in 2020.
The economists in the latest survey are more optimistic about manufacturing, expecting the sector to shrink by 1.4 per cent this year - a big improvement from the 2.4 per cent contraction predicted in the previous survey. On average, economists see a manufacturing recovery next year - with a median forecast of 0.7 per cent growth.
CIMB Private Banking economist Song Seng Wun said: "We are cautiously optimistic that manufacturing, which has been the main drag on the economy, may have bottomed out in the third quarter. The lower base of comparison going forward may also help a better showing. The economy is also still supported by stable contribution from the services side."
While they still cite the further escalation of trade tensions as the biggest risk, similar to the previous survey, they see a stronger-than-expected upswing in the global tech cycle helping to boost manufacturing. Half of the economists polled see this as an "upside risk", up from 33 per cent previously.
Economists have raised the prospects of the global electronics cycle turning around in 2020 as the roll-out of 5G wireless technology drives chip demand.
Associate Professor Lawrence Loh of the National University of Singapore Business School said: "On the demand side, the coming months will see even more companies moving into automation and digitalisation.
"On the supply side, technology providers will be able to offer new technologies now, especially those driven by higher speeds through 5G."
However, economists continue to worry about a sharper-than-expected slowdown in China's economic growth and weaker global growth while holding out hopes for the easing of trade tensions and the effects of fiscal stimulus at home and abroad, the MAS survey shows.
Apart from the key manufacturing sector, economists also raised their forecasts for other parts of the economy, namely construction, private consumption, non-oil domestic exports and accommodation and food services.
They expect accommodation and food services to grow by 1.9 per cent, an improvement over the 0.8 per cent forecast in the previous survey.
However, their projections for the finance and insurance industry dropped slightly to 4.1 per cent, from 4.3 per cent in the earlier survey.
They also expect wholesale and retail trade to shrink by 3 per cent, compared with the 2.8 per cent slide forecast in September.
Besides GDP growth, economists also downgraded their expectations for overall inflation and core inflation. Respondents expect overall inflation to come in at 0.6 per cent, down from an earlier prediction of 0.7 per cent.
They expect core inflation to come in at 1.1 per cent, down from 1.2 per cent in September.
They also foresee the Singapore currency strengthening nearly 2 per cent against the US currency, from $1.388 per US dollar to $1.363.
The three-month Singapore Interbank Offer Rate (Sibor) - the benchmark for the pricing of most home loans - is expected to rise from 1.65 per cent in the September survey to 1.70 per cent.
A total of 22 private sector economists and analysts responded to the survey conducted last month.