Analysts see clearer signs of a pick-up next year: MAS survey

Singapore

HOPES of an economic boost from fiscal stimulus have dimmed, even as global trade tensions continue to weigh on the growth outlook, according to the latest quarterly survey of private-sector analysts by the Monetary Authority of Singapore (MAS).

Still, signalling more certainty, watchers have tightened the forecast for the new year: Singapore's growth in 2020 is now tipped to fall between 1.5 per cent and 1.9 per cent - narrower than the one per cent to 1.9 per cent range in September's poll.

"It seems like market sentiment has improved," Irvin Seah, senior economist at DBS, told The Business Times as survey results came out on Wednesday. "There seems to be more certainty, and it is narrowing to the upper bound of the original range."

Maybank Kim Eng economist Lee Ju Ye similarly remarked that the tightened forecast "may be due to growing optimism that the economy has bottomed in the second and third quarters of 2019, with Singapore having avoided a technical recession".

Barnabas Gan, an economist at United Overseas Bank (UOB), also wrote in a report that the economy is expected to strengthen on the back of services growth, an improvement in factory performance, "and a rosier external backdrop for the coming year".

Yet much continues to hinge on the outcome of global trade tensions, especially between the top two economies - the United States and China - which are locked in negotiations.

Heightened tensions were named a top risk to the Singapore economy, with about nine in 10 fingering the strained relationship between the trading partners as a threat - a similar share compared with September's poll.

On the flip side, close to two-thirds again cited easing tensions as a potential source of uplift for economic growth.

Barclays economist Brian Tan suggested that the narrower growth forecast range reflects optimism over a partial trade deal between the US and China, and green shoots in economic gauges such as purchasing manager sentiment in manufacturing - an industry battered this year by a downturn in the global electronics cycle.

The share of survey respondents who believe that a stronger rebound in the global tech industry could offer Singapore a boost has risen from one-third in September to one-half now.

Still, Ms Lee noted that the US has resumed "an aggressive stance on trade" since the MAS survey on Nov 21, such as with threats of tariffs on imports from France, Argentina and Brazil, while Mr Seah called embattled US President Donald Trump's policies "opening more fronts in the trade war at a time when the European economy is not at its strongest".

UOB's Mr Gan also wrote that "we remain concerned, given the trade uncertainties surrounding the US-China trade talks, as well as the slowing Chinese economy into the next year".

As for fiscal stimulus measures - whether at home or abroad - the share of respondents who are looking for such an uplift fell slightly to 37.5 per cent, from 44.4 per cent before, ahead of the next national Budget.

There has been a recent turn in some markets towards support measures such as infrastructure investment, as the MAS noted in a twice-yearly review in October; but such spending may be less likely here.

Prime Minister Lee Hsien Loong had last month warned against turning to higher public spending and lower interest rates and taxes as a panacea for the economic slowdown - echoing similar remarks from Minister for Trade and Industry Chan Chun Sing to The Sunday Times in October.

Vishnu Varathan, regional head of economics and strategy at Mizuho Bank, told BT that the impact of fiscal stimulus has been limited by a range of factors worldwide, from budgetary constraints in Indonesia and Malaysia, to capacity constraints in the Philippines and Thailand, and a tight grip on the purse-strings in Germany.

Globally, upsizing the recovery becomes more challenging in a world where fiscal boost is seen to be less of an emphatic response - and, though Singapore has ample ability to spend, fiscal injection would be "less efficacious" in its open economy, he said.

DBS's Mr Seah also noted that an improved economic outlook may curb the call for fiscal stimulus in any case.

"The government sees less need to 'pump-prime' the economy, and will focus more on longer-term, structural issues," he said, citing economic transformation, climate change and an ageing society as key areas of concern.

On average, the 22 analysts who responded to the survey tipped growth to come in at 0.7 per cent in 2019, and 1.5 per cent in the year after.

The poll does not represent the MAS's views or forecasts. Singapore has instead guided for growth of 0.5 per cent to one per cent this year, followed by a modest pick-up to between 0.5 per cent and 2.5 per cent.

All told, the survey respondents may be ruling out "some of the more severe pressures on growth", such as a no-deal Brexit, said Mr Varathan, referring to the terms of Britain's planned departure from the European Union.

"But at the same time, and critically, no significant upside risks (are) appearing either, hence the conspicuous absence of an appreciable upward shift of the range."