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Nomura sounds bearish call on S'pore economy, cuts 2017 GDP growth forecast
NOMURA has cut its 2017 GDP (gross domestic product) growth forecast for Singapore, citing the openness of the economy here and domestic weakness in the labour market.
The bank cut its expected economic growth next year to 0.7 per cent from one per cent, well below the official growth forecast range of 1-3 per cent.
"We find it hard to share the government's optimism on the growth outlook, as Singapore's ultra-open economy and financial centre will likely be one of the most exposed in Asia to the UK leaving the European Union, the threat of trade protectionism from the US and political risks in Europe," it said in a report.
It also cited the high levels of household and corporate leverage that imply vulnerability to a likely faster pace of interest-rate hikes in the United States in response to president-elect Donald Trump's policies.
"Labour market conditions have also weakened, especially for skilled workers, which is raising the risk of structural unemployment as the economy continues to restructure and entire industries undergo transformation and disruption. Conversely, supply of less-skilled workers will likely remain relatively tight, as the government is unlikely to reverse its tightening on foreign labour policy," Nomura added.
It expects firms here to continue struggling to improve productivity growth, which remains disappointing, as the operating environment grows ever more challenging amid continuing lacklustre growth.
Nomura expects the Committee on the Future Economy to have the government take a more hands-on approach next year, and focus on developing new sectors, digitisation and re-training workers in close partnership with industry leaders.
"However, such endeavours tend to be slow and therefore have a limited impact on the near-term growth outlook. With labour productivity growth still lacklustre and demographics unfavourable, the medium-term outlook remains downbeat, in our view," it said.