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Recession odds spike as economists slash Singapore growth forecast to 0.6%: survey

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The full-year forecast for Singapore’s growth was more than halved by private-sector watchers last month, according to results of a quarterly poll released on Wednesday.

THE full-year forecast for Singapore’s growth was more than halved by private-sector watchers last month, according to results of a quarterly poll released on Wednesday.

Gross domestic product (GDP) is now expected to grow by just 0.6 per cent in 2020, down from the rosier 1.5 per cent projected at the previous survey in December 2019.

Meanwhile, chances of an economic contraction are nearly 30 per cent, according to respondents in the survey of professional forecasters that is carried out by the Monetary Authority of Singapore (MAS). Back in December, the odds of a negative showing had been pegged at a mere 2 per cent.

The 21 economic analysts replied to a survey that was sent out on Feb 18, a day after the MAS and Ministry of Trade and Industry jointly slashed their official growth forecast to a range of between -0.5 per cent and 1.5 per cent, indicating the possibility of a recession.

The gloomier outlook in the survey came on expectations of weaker economic performance across the board, with the manufacturing, wholesale and retail trade, and accommodation and food services industries now tipped to contract in the year, against earlier predictions of growth.

Private consumption is now expected to grow by a more muted 1.9 per cent in 2020, down from the earlier forecast of 2.7 per cent, while the projection for non-oil domestic export growth plunged from 1.6 per cent to 0.2 per cent, after a separate downgrade by Enterprise Singapore (ESG).

Economists also trimmed their inflation outlook for both all-items inflation and the core inflation metric that is used by the MAS to guide monetary policy, as the unemployment rate forecast inched up to 2.4 per cent, from 2.3 per cent in the previous poll in December 2019.

“More accommodative global financial conditions emerged as the most-cited factor that could drive an improvement in financial market and lending conditions,” the MAS noted in its report, as 70 per cent of  respondents named global financial easing as an upside driver.

Some 40 per cent of respondents also indicated that a weakening in the Singapore dollar’s nominal effective exchange rate (NEER) could offer uplift to growth.

The MAS meets for its half-yearly monetary policy review in April, and Citi analysts Kit Wei Zheng and Ang Kai Wei reiterated in a separate report on Tuesday that the central bank is likely to move the Singdollar’s pace of appreciation to a “zero-slope” neutral stance, but should hold off on lowering the mid-point of the policy band in which the currency is allowed to trade.

“A flat slope would re-align the NEER to transitory shock in GDP levels and the output gap implied by the downgraded official forecast,” the Citi analysts wrote. “We note MAS’s preference for calibrated, unhurried moves, which provides a ‘steady hand’ against more aggressive easing elsewhere, and argues against both inter-meeting easing and downward re-centring in April.”

All the same, world events may have taken a turn for the worse since the survey - which does not represent the MAS’s own views or forecasts - was sent out last month.

The MAS and MTI lowered their growth forecast amid the Covid-19 outbreak that began in China. The infectious disease has since spread rapidly to more than 100 places around the world.

Similarly, ESG flagged the risk of lower oil prices on Singapore’s 2020 trade performance in February, before a price war broke out this week between producers Saudi Arabia and Russia.