Economy watchers trim Singapore 2019 GDP forecasts

Growth expected at 2.6% instead of 2.7%; manufacturing could continue to be a drag

SINGAPORE is headed for a slowdown, private-sector analysts said, while agreeing that the US-China trade war is the top risk to the economy.

Growth in next year's gross domestic product (GDP) is expected to ease by a wider margin than was projected three months ago, according to the latest quarterly survey by the Monetary Authority of Singapore (MAS) released on Wednesday.

The manufacturing sector - where the linchpin electronics segment has hit a bump - could continue to weigh down the Singapore economy, with the long-awaited recovery in construction perhaps unable to offer relief.

Economists trimmed their forecast for next year and predicted that Singapore's growth will come in at 2.6 per cent, down from the 2.7 per cent forecast earlier.

For 2018, GDP growth is expected at 3.3 per cent, 0.1 point lower than the projection from a similar poll in September - even as 2018's full-year estimate was bumped up from 3.2 per cent.

Song Seng Wun, an economist at CIMB, told The Business Times on the phone that the adjustments for both years likely came on the back of Singapore's stronger-than-anticipated showing in the first half of 2018.

The year-end momentum will likely carry over into the first six months of next year, he added.

Separately, trade protectionism was seen as a top downside risk, cited by all 23 respondents, against 89 per cent of those polled in September. The share of those fretting over rising interest rates and a slowdown in China also edged up, to 41 per cent.

According to the December survey, the frostier economic climate will likely come on a steep slowdown in the manufacturing sector, where growth could drop from 7.4 per cent this year to just 3 per cent next year. This is even as growth in non-oil domestic exports may fall by more than half, from 6.2 per cent to 2.9 per cent.

The finance and insurance sector might also see year-on-year growth cool from 6.9 per cent to 5.4 per cent.

With domestic property-market curbs such as tighter loan-to-value limits and bigger minimum unit sizes, Maybank Kim Eng senior economist Chua Hak Bin said: "Property measures are aggravating the growth downturn, dampening real estate-related services and mortgage growth."

And these declines likely will not be offset by the pick-up that is expected in other economic areas.

Singapore's ailing and stubbornly contractionary construction sector is forecast to finally turn positive in the new year, with 1.5 per cent growth.

Both economists who spoke to BT said the sector may have at last bottomed out, with Dr Chua pinning a potential turnaround on redevelopment works from the recent en-bloc boom.

Growth in wholesale and retail trade could also inch higher, to 1.7 per cent, from 1.3 per cent this year.

Mr Song said: "That's a function of the resilience of the domestic and regional economy, even though global growth may slow down a bit."

But Dr Chua warned: "Wholesale trade may be supporting by front-loading activity from China exporters and may not be sustainable."

Meanwhile, economists have adjusted their headline inflation forecast for 2018 down to 0.5 per cent, in line with official estimates, and pared their estimate for next year to 1.3 per cent, from 1.5 per cent in September.

Along similar lines, private consumption is expected to ease to 3.1 per cent next year, from 3.4 per cent.

Dr Chua said: "We think that inflation pressures will likely moderate in 2019, as oil prices recede and growth slows. Alarm bells should start ringing if manufacturing starts contracting and growth stumbles further."

Still, Mr Song noted: "More (monetary) tightening and full employment in the labour market will still exert upward pressure on prices."

The MAS had allowed the Singdollar to appreciate at both its April and October policy meetings this year.

But Mr Song added that a more subdued economic outlook "is very much cyclical": "We call it maturing late-cycle growth. If we get another boom next year, it just means the risk of a downturn increases for the following year."

The survey, which does not represent the MAS' views or forecasts, was sent out on Nov 22 - before a short-lived trade truce was announced.

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Economy watchers trim Singapore 2019 GDP forecasts

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