Singapore’s shops have been kept busy by falling prices. Source: Pixabay
Singapore’s economy is expected to show growth this quarter, meaning the city-state should avoid being labelled in recession, although analysts still point to challenges ahead.
Since October, 3.7-per-cent growth was expected from the previous quarter on an annualised basis, backed by a jump in factory output in November, according to a Reuters poll.
While that would be an improvement from the 2-per-cent contraction in the third quarter, analysts were cautious in their forecasts for the trade-reliant economy.
“Look at the number of global downside risks that we have. You’ve got Trump obviously, and what kind of protectionist measures he can impose,” said analyst Brian Tan of Nomura.
The Chinese slowdown, Brexit and European elections also presented risks and the Singaporean labour market appeared to be weakening, Tan said. The economist predicted GDP growth of 0.7 per cent next year.
Other analysts have been slightly more positive about Singapore’s prospects.
After a record 24 straight months of negative readings, consumer prices in Singapore have stopped falling, government data has revealed.
The consumer price index (CPI), a measure of headline inflation, was recorded at 0 per cent in November from a year ago.
The reading ended Singapore’s longest period of negative price growth.
The falling price of crude oil, which dominates oil-related items such as petrol and electricity in the CPI basket, was a major factor and was an input to nearly all economic activity, said CIMB Private Banking economist Song Seng Wun.
The government’s introduction of cooling measures to the housing and motor vehicle markets had also contributed. Accounting for more than one-third of headline inflation, cheaper certificate of entitlement premiums for cars and decreasing home rents had led consumer prices down its longest stretch of declines, Song said.
The government’s forecast for full-year growth this year was 1 to 1.5 per cent, its weakest performance since 2009, when GDP contracted by 0.6 per cent.
Analysts say the government’s budget, and recommendations from the Committee on the Future Economy, both expected in the first quarter of 2017, were unlikely to contain measures that would significantly boost short-term growth.
“That’s just going to probably…offer some relief for the corporate sector. It won’t do very much to shift the dial on headline GDP growth,” said Selena Ling, strategy boss at OCBC Bank.
The committee hopes to devise policies to keep the Lion City’s economy competitive and to spot areas of growth.
Fourth-quarter year-on-year growth of less than 1 per cent would strengthen the argument for monetary easing by April, said Vaninder Singh, an economist for NatWest Markets.
“If we get such a number it would strengthen our conviction in calling for a 1-per-cent lower re-centring,” Singh said.
