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Quick takes: Singapore economy dodges tech recession but still in slow motion

Tuesday, January 3, 2017 - 08:48

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The Singapore economy grew by 1.8 per cent for the whole of 2016. It averted a technical recession with a 9.1 per cent quarter-on-quarter growth in the fourth quarter. Q4 year-on-year growth was at 1.8 per cent.

THE Singapore economy grew by 1.8 per cent for the whole of 2016. It averted a technical recession with a 9.1 per cent quarter-on-quarter growth in the fourth quarter. Q4 year-on-year growth was at 1.8 per cent.

But economists were not impressed. Here is what some of them have to say about these advance estimates:

Ng Weiwen, ANZ:

"Singapore doges a technical recession comfortably in Q4 but we expect the Singapore economy to remain in 'slow-mo' (slow motion). Specifically, we do not expect the Singapore growth outlook to improve materially in 2017.

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Market voices on:

"At present, prospects of a more protectionist trade policy would be negative for Singapore who is wedded to the old export model and this will have knock on impact on domestic incomes. Consequently, domestic demand weakness should continue to weigh on an already subdued labor market."

Vishnu Varathan, Mizuho:

"... this is hollow cheer as Q4 (out-)performance, on many dimensions, proves to be a flash in the pan. Fact is, drivers of growth remain uncertain, if not unsustainable.

"And the trouble is that despite a bottoming expected at (still) weak levels in oil-related industries, the rest of the manufacturing remains tentative; depending to a large extent on China's fortunes and a potentially dampened demand from US protectionism.

"With global demand fraught with uncertainties, it is too soon to declare that Singapore is out of the woods. And growth may be trapped around sub-par 1 per cent."

Kit Wei Zheng, Citi:

"... this remains a cautious forecast, given structural external demand drags from an uncompetitive REER (real effective exchange rate) and risks from protectionist policies.

"Even if exports and headline GDP outperform our forecasts, household debt servicing burdens, corporate sector consolidation and jobs market slack could still see domestic-oriented segments underperforming - a classic 'dual economy' scenario."

Selena Ling, OCBC:

"... the 2017 outlook remains tentative, with GDP growth likely still rangebound at around 1-2 per cent (official forecast is 1-3 per cent), amid key uncertainties like the Trump presidency potentially having spillover effects for global trade, China's slowdown, and heightened market volatility, especially on the currency and interest rate front, potentially weighing on corporate and consumer confidence."

Vaninder Singh, NatWest Markets:

"The strength has been concentrated in an area (manufacturing) that is in a policy-induced structural decline, while the part of the economy the government wants to grow (services) has continued to fare poorly.

"For the above reasons - (1) weak services, (2) still slowing domestic demand, and (3) the likelihood of a growth downgrade - we believe both fiscal and monetary easing remain necessary. We hold this view even before fully taking into account any possible impact on trade from the Trump administration's policy agenda."

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