You are here


Decade-low growth in 2019 clouds 2020 forecasts for Singapore GDP

Economists hold cautiously positive outlook amid signs of bottoming as well as confidence in services sector

Clear skies ahead? DBS expects a 1.4% growth in 2020, UOB 1.5%, OCBC 1-2%, while Citi and Maybank Kim Eng top the forecasts at 1.8%.


WHILE Singapore's 2019 economic growth was in line with economists' expectations, it is the worst showing in 10 years, leaving economists divided on the extent of recovery that 2020 would bring.

Full-year gross domestic product (GDP) in 2019 was 0.7 per cent, according to advance estimates from the Ministry of Trade and Industry (MTI) on Thursday, as predicted by a Monetary Authority of Singapore (MAS) poll of economists released early last month.

This comes as the economy expanded 0.8 per cent in the final quarter of 2019, according to flash data, a slight uptick from the 0.7 per cent clocked in the third quarter and matching private sector economists' forecast in a Bloomberg poll.

In November, MTI said it was expecting full-year GDP growth to be between 0.5 and 1 per cent, reflecting tentative optimism after two earlier downgrades that had at one point included expectations of zero growth.

Nonetheless, the latest figures indicate a worse performance than 2018's GDP growth of 3.1 per cent. It is also the slowest growth since the global financial crisis in 2009, which saw an expansion of just 0.1 per cent year on year.

Last year's expansion was mainly driven by the services sector, which grew 1.4 per cent year on year in Q4, faster than the 0.9 per cent growth in Q3.

But this was offset by the manufacturing sector, which contracted 2.1 per cent year on year in Q4, extending Q3's 0.9 per cent decline. MTI attributed the poor showing to output decline in the electronics, chemicals and transport engineering clusters.

HSBC economist Yun Liu noted that manufacturing, particularly in electronics, saw renewed deterioration after a strong rebound in Q3. "This suggests that the previous quarters' recovery was likely a result of front-loading in the run-up to the previously scheduled tariff increase in December," Ms Liu said.

MTI is expected to release the preliminary GDP estimates for Q4 and the whole of 2019 in February. In the meantime, these flash estimates have drawn mixed views from economists on how the GDP would fare in 2020.

Barclays economist Brian Tan expects 2020 growth to rise "only modestly to a still-subpar 0.9 per cent".

"Our caution on the growth outlook stems from a continued divergence between the exports and production of electronics, which remained sizeable as of November 2019," Mr Tan said.

Other economists posted a cautiously positive outlook following signs of bottoming as well as confidence in the services sector, even as they remained cognisant of external downside risks and the uncertain global economic environment. Part of the optimism stems from the highly anticipated "Phase One" trade deal between the US and China, scheduled to be signed on Jan 15 if all goes well.

DBS Group Research's senior economist Irvin Seah is expecting a 1.4 per cent growth in 2020, while UOB economist Barnabas Gan predicts a 1.5 per cent expansion.

OCBC Bank's chief economist Selena Ling believes GDP growth will be between one and 2 per cent. Economists from Citi and Maybank Kim Eng were most optimistic with a 1.8 per cent growth forecast.

The next key milestone to watch is the 2020 Budget statement on Feb 18, when Deputy Prime Minister and Finance Minister Heng Swee Keat is expected to announce a slew of measures to support businesses and workers.

OCBC's Ms Ling said: "A more expansionary fiscal budget for 2020 will likely do any heavy-lifting needed in the interim, following MAS' monetary policy easing back in October 2019."