EVEN before volatility in the global financial markets spiked again in recent weeks, Singapore's private sector economists had already tempered their growth expectations for this year and next. And as the year closes with the global economy looking fragile, many are highlighting downside risks to next year's growth prospects that now loom a little larger.
The Monetary Authority of Singapore's (MAS) latest quarterly poll of professional forecasters - released on Wednesday - showed a median growth forecast of 3.1 per cent for 2015, just slightly above the 3 per cent they are expecting for this year.
That 2014 forecast, while in line with the government's forecast of "around 3 per cent" growth, was cut from 3.3 per cent a quarter ago. The 22 respondents to MAS's survey also cut their forecasts for Q4 GDP growth to 2.3 per cent from the September survey's 3.1 per cent. They had turned more bearish on most sectors, particularly construction and manufacturing, but have raised their 2014 growth expectations for the finance and insurance sector.
But 2015 could turn out to be a year of falling forecasts too, said economists that BT spoke to, hesitant to make too much of the 3.1 per cent median forecast being a little higher than this year's growth. MAS's poll was conducted in late November. Since then, the price of oil has fallen under US$60, the Russian rouble plunged earlier this week, and more weak economic data from China, Japan and Europe have been released.
At least one economist, DBS's Irvin Seah, has cut his Singapore GDP forecast from 3.6 per cent to 3.2 per cent since - and sees risks that could bring that number lower. "There is slow growth in China, diverging monetary policy from the key central banks, and now, more volatility in the financial markets," he said.
The forecasts from those who responded to MAS's poll ranged from 2.4 to 3.7 per cent, and MAS's report said that a probability distribution of these shows that the most likely outcome is a slowdown to growth of 2 to 2.9 per cent next year. That would be the lower half of the official 2 to 4 per cent growth forecast range.
"2015 looks likely to start off on a somewhat handicapped tone, especially if risks are transmitted to regional financial centres including Singapore," said OCBC economist Selena Ling. "Financial markets, whether foreign exchange or equity, continue to remain vulnerable as traders and investors trim risk positions across the year-end period."
These uncertainties add to the chief risks for Singapore next year - weak external demand as China, Japan and Europe's economies remain sluggish, and the manpower constraints and elevated costs exacted by Singapore's ongoing economic restructuring, Ms Ling said. Non-oil domestic exports (NODX) data released on Wednesday also pointed to weak demand, especially for electronics. "We haven't seen a back-to-back NODX contraction since at least 1981, which could suggest some competitiveness challenges for the electronics industry," she said.
But Barclays economist Leong Wai Ho had a more optimistic take: that the positive impact of lower oil prices on growth had not been fully factored into the latest survey forecasts. "While Russia suffers from lower oil prices, it is an enormous stimulus for the rest of the world, especially Asia. Growth should start re-accelerating from Q2 next year, when the effect of lower oil is fully passed through," he said.
And while Singapore's real estate downturn and weaker services sector will drag growth down next year, Mr Leong thinks the main risk to the local economy is from a cancellation of oil rig orders, as oil prices tumble.
On the inflation front, expectations have moderated further too.
MAS's survey shows that economists now expect headline inflation of 1.1 per cent for 2014, down from 1.8 per cent a quarter ago. Core inflation, which strips out accommodation and private transport prices, is tipped at 2 per cent, down from 2.2 per cent in the previous survey. Both these estimates are at the lower end of the government's forecasts of one to 1.5 per cent headline inflation and 2 to 2.5 per cent core inflation for 2014.
For 2015, private sector forecasters are expecting core inflation of 1.9 per cent, which is beneath the government's 2 to 3 per cent forecast. Their median headline inflation forecast of 1.1 per cent falls within the official 0.5 to 1.5 per cent forecast range, which the MAS says reflects the impact of muted housing rentals.
Mizuho economist Vishnu Varathan said: "Lower oil prices have triggered an embarrassingly mechanical response of lower inflation outlook by about 0.2 to 0.3 percentage points. The upshot is that the MAS will still have to see lower wage pressures, as well as how the Fed responds before making a move."
While Mr Varathan thinks, like most other economists, that the central bank will stick to its current stance of keeping the trade-weighted Singapore dollar on a path of modest and gradual appreciation in April, he thinks the likelihood of some degree of easing then has now risen.
"The potential for another spasm in financial markets will be a magnified risk in 2015 - given the combination of asset market, political and policy channels through which it could transmit - and that is something that the MAS will not make light of," said Mr Varathan.