THE Singapore government expects the economy to grow 2-4 per cent in 2015, as a pick-up in external demand benefits externally-oriented sector but labour constraints continue to weigh down the construction, retail and food services sectors.
This is in line with the 3.45 per cent median growth forecast of 22 economists polled by Bloomberg before the Ministry of Trade and Industry (MTI) announced its official forecast on Tuesday morning.
It also implies that the Singapore economy will grow at a similar pace to that notched up this year. MTI now expects Singapore's GDP growth for this year to come in at 3 per cent, narrowing its forecast from a previous range of 2.5 to 3.5 per cent.
MTI said that the global recovery is likely to remain uneven next year, with the US economy improving on stronger domestic demand but the eurozone's and Japan's growth staying sluggish. China's growth is also expected to ease further due to slower real estate activities, but Asean economies such as Malaysia and Indonesia will be supported by healthy investment growth.
However, the forecast of 2-4 per cent growth does not account for some risks on the horizon. These include concerns that the eurozone could fall into a deflationary spiral - given its weak growth and persistently low inflation - as well as uncertainty over when and how quickly the US Federal Reserve will raise the Federal Funds rate.
"An unexpected tightening of monetary conditions would weigh significantly on US' financial markets and business sentiments," MTI said.
Over in China, there is also the risk of the economy slowing more sharply than expected if the real estate market corrects sharply and leads to a spike in property-related loan defaults, which would hit the financial system.
Ongoing geopolitical tensions involving Russia and Ukraine, and key oil producers in the Middle East and North Africa, as well as the possibility of a global Ebola outbreak, are some other risks to Singapore's growth next year, MTI said.