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Quick takes: Economists see slower GDP growth in H2, no change to monetary policy

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Singapore's Ministry of Trade and Industry on Thursday narrowed its 2016 GDP (gross domestic product) growth forecast to 1-2 per cent from its earlier estimate of 1-3 per cent.

SINGAPORE'S Ministry of Trade and Industry on Thursday narrowed its 2016 GDP (gross domestic product) growth forecast to one-two per cent from its earlier estimate of one-three per cent. It also announced that the Singapore economy expanded 2.1 per cent in the second quarter of this year.

Here's what private-sector economists say about the fresh data:

On the revised full-year growth forecast

Vaninder Singh of RBS: "We assess Singapore's cycle to have peaked in Q2 and we are now likely to enter a phase of slower growth. Indeed, odds of a technical recession (two successive quarters of negative sequential growth) are high. We expect growth in H2 to slow to one per cent year-on-year bringing the full year 2016 tally to 1.6 per cent."

Selena Ling of OCBC: "The one-two per cent official growth forecast revision is slightly more bearish than what we anticipated, given H1 growth is already 2.1 per cent year-on-year and H2 growth would have to potentially slip to zero for the full year to hit the lower one per cent floor of the revised official forecast range."

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On monetary policy implications

Alvin Liew of UOB: "We still expect that the Monetary Authority of Singapore (MAS) will keep their current monetary stance of a zero appreciation of the S$NEER (Singapore dollar nominal effective exchange rate) unchanged in their upcoming policy meeting in October 2016, in view of the still-weak global growth conditions that will continue to affect Singapore's export-oriented industries.

"We do not think that the MAS will further weaken the Singapore dollar via a one-off reduction in the midpoint, as core inflation has remained on an upward trend in recent months."

Vishnu Varathan of Mizuho: "Growth expectations (and risks) tilted to the softer side of the outcome spectrum should not be equated to a mechanical easing response. And the MAS has explicitly said so; that policy is appropriate baring 'marked deterioration'.

"Our base case aligns with the MAS to standing pat given the pre-emptive policy easing; crucially, that S$NEER range is suspended (with the appreciation bias revoked) at levels appropriate for weak demand and price stability."

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