Global trade woes, cooling steps bite into 2019 GDP forecast
Private economists, however, stick to their projection of 3.2 per cent GDP growth for this year
Singapore
EXTERNAL factors loom over Singapore's economic growth, according to the latest poll of private economists, even as recent policies could take a bite out of the domestic property market.
Their gross domestic product (GDP) growth forecast for next year has been shaved to 2.7 per cent, from a prediction of 2.8 per cent in June, in a survey by the Monetary Authority of Singapore (MAS) out on Wednesday.
But the economists stuck to a projection of 3.2 per cent GDP growth for this year, unchanged from the first two rounds of the quarterly poll.
Economic expansion from 3 per cent to 3.4 per cent is the most likely outcome, they said, but chances of it coming within the 3.5 per cent to 3.9 per cent window have improved. The official forecast from the Ministry of Trade and Industry is between 2.5 per cent and 3.5 per cent, as of August.
The economists bumped up their manufacturing growth estimate to 7.6 per cent, from 5.3 per cent previously, and raised the outlook for accommodation and food services from 2.2 per cent to 2.9 per cent growth.
But they pared their growth forecasts for the finance and insurance sector, from 7 per cent to 6.7 per cent, and for wholesale and retail trade, from 2 per cent to 1.5 per cent.
The picture is even bleaker in the construction sector, where expectations at the start of the year were for 1 per cent growth. The latest prediction is for a contraction of 4.2 per cent, widening from 2.1 per cent in June. The sector under-performed in the first half, for both public and private projects, United Overseas Bank senior economist Alvin Liew noted.
He said that growth "could be further impacted with the delay in the construction of the high-speed rail between Singapore and Kuala Lumpur, and the additional cooling measures in the private property market".
Shock real estate cooling initiatives kicked in overnight in July, and the proportion of economists calling the domestic property market an upside factor for the Singapore economy has dropped to 26 per cent in the latest poll, from 47 per cent in June.
Maybank Kim Eng economist Lee Ju Ye told The Business Times that the move will likely weigh not just on construction, but on the finance and insurance sector and business services too. She cited the median economist forecast for domestic banking unit loan growth, which was cut to 5.1 per cent from 6.3 per cent in the June poll.
Global trade remains a key concern for economists, no thanks to the United States' hawkish stance, with 89 per cent of respondents flagging trade protectionism as a downside risk, against 84 per cent in June.
Weak external growth was a worry for 42 per cent of respondents, on the back of a liquidity crunch in emerging markets, while 37 per cent fingered a possible slowdown in China, amid credit tightening there. "Capital flight remains a risk for Asia markets as the currencies are likely to weaken further in the second half of 2018, and continue to weaken if trade tensions continue to rise," warned Mr Liew.
Merrill Lynch economist Mohamed Faiz Nagutha has optimistically put GDP growth at 3 per cent for 2019, on hopes of the US and China reaching a deal on trade "at the end of the day", as well as supportive domestic conditions. But, "from some other people's perspective, a sustained trade war could be their baseline", he said.
The economists predicted an unemployment rate of 2.1 per cent at year-end, the same as in an earlier poll.
The full-year forecast for headline inflation was reduced to 0.7 per cent, from 0.8 per cent in June, while projections for core inflation - an MAS indicator that excludes housing and private road transport costs - inched up, from 1.6 per cent to 1.7 per cent.
Mr Nagutha called Singapore's expected growth "firm". This, coupled with inflation growth, should keep the central bank on track for monetary policy normalisation, he said. The MAS will deliver its next Singapore dollar rate decision in October.
Ms Lee added: "Given the downside risks to growth with the escalation of the US-China trade war and the new property measures, we expect MAS to maintain the current slight appreciation stance in next month's meeting."
The MAS survey was sent out on Aug 13 and reflects the views of 23 analysts who watch Singapore's economy.
