ASEAN KEY DESTINATIONS
Singapore’s slow Q4 growth signals weaker 2015 outlook
SINGAPORE’S economic growth slowed more than expected in the fourth quarter as the manufacturing sector contracted in the face of erratic global demand, raising concerns about the outlook for 2015.
Gross domestic product expanded by 1.6 per cent in the fourth quarter on an annualised and seasonally adjusted basis, advance estimates from the Ministry of Trade and Industry (MTI) showed yesterday.
That was down sharply from 3.1 per cent in the third quarter, and below the median forecast of 3.0 per cent growth in a Reuters survey.
The weak figures came as the global economy ended 2014 in a fragile state, with factory activity shrinking in China, euro zone business growth remaining weak, and emerging market giant Russia in a spiralling currency crisis.
The manufacturing sector contracted 5.8 per cent in October-December, and shrank 2.0 per cent from a year earlier.
“Unlike 2014, when we started on a strong note for the first half and after that the momentum tapered off, we could be starting 2015 on a relatively soft note, especially as people are looking forward to the Fed to normalise policy,” said Selena Ling, an economist at Oversea-Chinese Banking Corp.
She said she expects Singapore’s economy to grow 2-3 per cent in 2015, below the government’s forecast for 2-4 per cent growth.
Full-year growth for 2014 slowed to 2.8 per cent from 3.9 per cent in 2013.
An uneven global recovery and lacklustre exports have tempered growth for Singapore this year.
The country’s trade agency has said non-oil domestic exports are likely to grow between 1.0 to 3.0 per cent in 2015. Its 2014 forecast is for a drop of 1.5 to 1.0 per cent, after a 6.0 per cent fall in 2013.
The electronics sector, a key driver of exports, has struggled to tap into global demand for smartphones and other hi-tech products, and has lagged regional competitors such as South Korea and Taiwan.
In addition, the government’s push to reduce a politically unpopular reliance on overseas workers has led to a tight labour market and wage pressures, affecting economic growth.
Prime Minister Lee Hsien Loong said in his New Year’s speech that growth “will be slower than we are used to”, due partly to the tightening of policies, including those on foreign workers.
In the wake of a series of property cooling measures over the past few years, private residential property prices fell 4.0 per cent in 2014, the first annual decline since 2008.
“We are cautious on the outlook for 2015 as the economy faces headwinds from a softening property market and slowing in the credit cycle. External demand will also likely remain modest,” said economist Benjamin Shatil at JP Morgan.
Most economists expect the Monetary Authority of Singapore to stick to its tight stance of allowing a “modest and gradual” appreciation of the Singapore dollar at its next policy review in April and to keep all related policy settings unchanged.
But there is a minority view that the MAS will ease policy in April, as weak oil brings disinflationary pressures and growth momentum remains tepid.
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