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Economists paint dismal picture for this year

External demand will still be weak, and the labour market will stay tight, they say

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It is good the Year of the Goat has been ushered in, for the animal's agility and sure-footedness may well be needed to traverse this year's bumpy terrain.

Singapore

IT is good the Year of the Goat has been ushered in, for the animal's agility and sure-footedness may well be needed to traverse this year's bumpy terrain. Economists and heads of equity research are mostly painting a dreary picture of the year, contrary to the lively performance Goat years have brought in historically.

In the past four Goat years since Singapore's independence in 1965 - 1967, 1979, 1991 and 2003 - the animal that is a sign of peace, stability and prosperity in the Chinese horoscope has largely heralded good fortune. The Straits Times Index climbed an average of 29 per cent year-on-year in those years, almost triple the 11 per cent average of non-Goat years.

CIMB economist Song Seng Wun is bullish on the Straits Times Index this year from a technical standpoint. And from a fundamental standpoint, he believes that the US economy being on a more stable growth path is fairly encouraging.

"It looks like there is recovery in external demand, which will be helpful for Singapore's export-oriented economy," he said.

But his outlook seems to be the most upbeat among several economists and research heads The Business Times spoke to.

Unlike Mr Song, OCBC economist Selena Ling expects external demand recovery to be less-than-robust, which does not bode well for the Singapore economy. On top of that, there are domestic supply constraints, especially on the labour front, she said; surveys also show that, despite the tight labour market, employers remain cautious about salary increments this year.

Roger Tan, chief executive of Voyage Research, said the Singapore market will come up against plenty of headwinds this year.

At the macroeconomic level, the Singapore economy is weighed down by the money-supply crunch and a sluggish property market, he said.

The combination of the two "puts weight on the wealth of individuals and also the propensity to consume", he added.

But he views this as a necessary evil to manage Singapore's "runaway inflation" over the last few years.

At the same time, local investors have lost confidence in the Singapore stock market, and new regulations have introduced policy uncertainties for investors, he said.

He thus believes it will take some time to bring investors back to the local bourse.

"However, given the weaker Singapore dollar and the US economic recovery, there could be some hope for Singapore's exports," he said.

Similarly, CIMB research head Kenneth Ng believes 2015 will be a glum year for the Singapore economy, mainly because corporate earnings trends have been weak. In the offshore and marine sector, the lower oil prices are likely to lower the number of projects and the quantum of orders.

On the other hand, there is an upside: companies such as Venture Corporation, with a large number of US subsidiaries contributing to group earnings, are likely to perform well because of the strong US dollar, he said.

Outlook for the region appears to be rosier. Disinflation and policy easing will drive Asian equity market performance this year, said a report by Credit Suisse last week.

The bank favours beneficiaries of monetary easing - Japan, Australia, China and India - and expects them to outperform the regional benchmark.

Fan Cheuk Wan, chief investment officer for the Asia-Pacific at Credit Suisse, said lower interest rates will support a growth recovery, lower the cost of equity and improve risk sentiment in the equity markets; Asian high-dividend stocks will also be attractive alternative sources of yield.

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INFOGRAPHICS: Goat years