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Quick takes: Economists see slower GDP growth in H2, no change to monetary policy

Thursday, August 11, 2016 - 12:54
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Singapore's Ministry of Trade and Industry on Thursday narrowed its 2016 GDP (gross domestic product) growth forecast to 1-2 per cent from its earlier estimate of 1-3 per cent.

SINGAPORE'S Ministry of Trade and Industry on Thursday narrowed its 2016 GDP (gross domestic product) growth forecast to one-two per cent from its earlier estimate of one-three per cent. It also announced that the Singapore economy expanded 2.1 per cent in the second quarter of this year.

Here's what private-sector economists say about the fresh data:

On the revised full-year growth forecast

Vaninder Singh of RBS: "We assess Singapore's cycle to have peaked in Q2 and we are now likely to enter a phase of slower growth. Indeed, odds of a technical recession (two successive quarters of negative sequential growth) are high. We expect growth in H2 to slow to one per cent year-on-year bringing the full year 2016 tally to 1.6 per cent."

Selena Ling of OCBC: "The one-two per cent official growth forecast revision is slightly more bearish than what we anticipated, given H1 growth is already 2.1 per cent year-on-year and H2 growth would have to potentially slip to zero for the full year to hit the lower one per cent floor of the revised official forecast range."

On monetary policy implications

Alvin Liew of UOB: "We still expect that the Monetary Authority of Singapore (MAS) will keep their current monetary stance of a zero appreciation of the S$NEER (Singapore dollar nominal effective exchange rate) unchanged in their upcoming policy meeting in October 2016, in view of the still-weak global growth conditions that will continue to affect Singapore's export-oriented industries.

"We do not think that the MAS will further weaken the Singapore dollar via a one-off reduction in the midpoint, as core inflation has remained on an upward trend in recent months."

Vishnu Varathan of Mizuho: "Growth expectations (and risks) tilted to the softer side of the outcome spectrum should not be equated to a mechanical easing response. And the MAS has explicitly said so; that policy is appropriate baring 'marked deterioration'.

"Our base case aligns with the MAS to standing pat given the pre-emptive policy easing; crucially, that S$NEER range is suspended (with the appreciation bias revoked) at levels appropriate for weak demand and price stability."

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