S'pore financial sector, O&M layoffs likely to ease: report

Singapore

EMPLOYMENT conditions in Singapore are expected to improve later this year as the drag from sharp retrenchments in financial services and oil and gas-related sectors ease, while a property recovery is not on the cards yet, said the latest report by the Institute of Chartered Accountants in England and Wales (ICAEW).

The Economic Insight: South-east Asia report released on Thursday also said that better employment conditions and additional fiscal support should lead to a pickup in spending.

However, growth in private consumption is still expected to remain relatively subdued, as more modest wage growth and higher inflation are expected to lead to slower gains in real earnings.

This is expected as a combination of negative wealth effects, associated with falling property prices, and a weaker labour market have taken their toll on household spending.

On the property front, correction in the housing market will continue, although the recent easing in housing restrictions will provide some support for the struggling sector.

"However, given the supply overhang, a recovery is not on the cards yet. The ongoing correction in the housing market is still expected to dampen growth this year but the prospects for 2018 are now slightly brighter," it said.

The report also noted that recent indicators suggest that a modest recovery in business investment may soon be underway. For one thing, business loans have risen 8.1 per cent year-on-year in Q1, the strongest growth in loans since 2014.

It also highlighted fiscal stimulus by the government - measures to support businesses and encourage investment in this year's Budget, as well as the S$700 million worth of infrastructure spending over 2017 and 2018 - which showed government investment is poised to accelerate.

But the expected two further rate hikes in the United States will lead to higher domestic interest rates this year, which will dampen the likely recovery in business investment.

While the domestic factors remain a drag, externally-dependent sectors can expect a brighter outlook.

Exports recovery will be bumpy as ICAEW expected the disappointing performance of exports in April to be temporary, while near-term growth will remain firm.

This is because the April's manufacturing Purchasing Managers' Index was down only slightly from the 26-month high seen in March, with new export orders still solid.

Over the coming quarters, it expected export growth to ease, reflecting a moderation in Chinese import demand following its very strong bounce in the first quarter of 2017.

Nevertheless, it expected the Singapore economy to grow 2.7 per cent in 2017, buoyed by better growth dynamics and ongoing recovery in global trade, although growth is likely to be uneven across sectors due to differing external and internal factors.

Mark Billington, regional director for ICAEW South-east Asia, said: "We are confident that an improved external environment will help sustain Singapore's growth - despite the drag from domestic factors."

The report also expected the Monetary Authority of Singapore (MAS) to maintain a neutral monetary policy.

"We expect MAS will maintain its policy of zero appreciation in the SG$NEER until late 2018. Although GDP growth is expected to improve, growth is likely to be irregular.

"Moreover, given softer wage growth, demand-pull inflation pressures will remain constrained. We do not expect inflation, excluding energy prices, to return to 2 per cent until mid-2018," it said.