Economists cut growth forecasts

Economists cut growth forecasts
Besides being a base for operational expansion, Singapore is also becoming a hub for financing solar assets.
PHOTO: The Straits Times

Persistently choppy conditions around the globe are taking a toll on Singapore's economic growth, with private sector economists now more cautious over the outlook.

The economists have downgraded their growth expectations for both the current third quarter ending Sept 30 and the full year.

In a marked dip in sentiment in just one quarter, the median estimate of economists polled was for the economy to grow 2.1 per cent in the July to September period, significantly slower than the prediction of 2.9 per cent made in June.

Full-year growth is now expected to be 2.2 per cent - well down from the 2.7 per cent forecast previously, said the latest quarterly Professional Forecasters Survey released by the Monetary Authority of Singapore (MAS) yesterday.

In all, 23 economists responded to the latest MAS survey sent out on Aug 11, the day China devalued the yuan. The responses would have come in over the past couple of weeks as Asian markets suffered their worst rout in years.

DBS Bank economist Irvin Seah said he had adjusted the full-year growth figures to 2.4 per cent in July - before the Ministry of Trade and Industry last month released worse-than-expected 1.8 per cent second-quarter growth numbers.

"The market has adjusted its view in the survey conducted in August, but since then more events have unfolded, particularly in China where the latest exports and PMI (Purchasing Managers' Index) data are not at all encouraging," he said.

"In fact, I will not discount the possibility of a technical recession in the third quarter - which I would give a 40 per cent chance - unless the US growth proves to be very significant in the near term."

The full-year growth estimates assume Singapore does not suffer a technical recession, which implies another quarter-on-quarter contraction in the third quarter after the second quarter's 4 per cent shrinkage.

China's growth was 7 per cent for the second quarter, its lowest since 2009 as manufacturing also shrank last month, the latest PMI showed.

Barclays senior economist Leong Wai Ho said: "The recovery ahead will be shallow and trade will remain weak... China's purchasing power is being hit by slowing growth, and the devaluation of the yuan will hurt our exports."

There are few signs of strong economic growth in Singapore as non-oil domestic exports fell 0.8 per cent year-on-year in July. Manufacturing activity here also stayed in contraction, as shown by the PMI reading of 49.3 for last month.

Economists also expect full-year inflation to be lower than previously estimated. Inflation is expected to be a negative 0.2 per cent, down from 0 per cent tipped in the previous survey. Core inflation - excluding private transport and accommodation - is expected to be 0.5 per cent, also down from 1 per cent.

The broad inflation measure has dropped for nine straight months after July's headline consumer price index was a negative 0.4 per cent.

But underlying inflationary pressure still remains, Mr Leong said.

This article was first published on Sept 3, 2015.
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