Singapore's growth forecast for 2015 under review but economy unlikely to weaken further in second half-year: MAS

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

SINGAPORE - The Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) are reviewing their growth forecast for the economy for 2015, but MAS said the growth momentum is not expected to deteriorate further in the second half-year.

Speaking to reporters at a press conference on MAS's annual report for financial year 2014/15, managing director Ravi Menon said the review will take into account the economy's weaker performance in the first half of the year as well as support factors in the second half.

Looking ahead, Mr Menon said MAS would continue to closely monitor three key risks in the external environment. They are Greece, whose situation remains highly uncertain; China, where the downside risk has increased; and, the Asean region, where financial conditions could tighten sharply when the US Federal Reserve raises interest rates.


But he said the global and regional economic recovery remains broadly intact, with the US economy regaining momentum after a weak first quarter.

Singapore's economy contracted by 4.6 per cent month-on-month in the second quarter, according to advance estimates released last week. For the first half of 2015, GDP growth came in at 2.3 per cent year-on-year, which is in the lower half of the government's 2 to 4 per cent full-year forecast.

"The global economy is expected to grow modestly in 2015, underpinned by a firmer expansion in the advanced economies," said MAS.

In the US, the Fed is moving closer towards the process of monetary policy normalisation, amid an improving economic outlook. The eurozone economy is seeing gradual improvement, while economic activity in Japan is recovering as the drag from the consumption-tax hike dissipates.

China's growth is likely to continue moderating and the rest of Asia should benefit from improvements in exports and lower oil prices, MAS said.

"Against this backdrop, the Singapore economy is expected to expand at a moderate pace of 2-4 per cent this year, in line with its medium term potential of 3 per cent on average," it said.

MAS also said there was no change to its inflation forecasts.

Both CPI-All Items inflation and MAS Core Inflation are expected to be lower in 2015 compared to last year due to lower oil prices. Core inflation excludes accommodation and private car transport.

Headline inflation and core inflation are projected to average -0.5 to 0.5 per cent, and 0.5 to 1.5 per cent respectively.

Mr Menon also said that he expects headline inflation to come in at the lower half of forecast range in 2015, but should pick up in 2016. He added that Singapore is "not facing deflation" as price declines have been neither persistent nor pervasive.