SINGAPORE ECONOMY

Stalling global recovery hits S'pore growth prospects: Poll

Analysts tip economy to grow 3.3%, down from 3.8% forecast 3 months ago

By Melissa Tan

SINGAPORE'S growth prospects look dimmer after a poor second quarter, according to a survey of 22 private sector economists that was released by the Monetary Authority of Singapore (MAS) yesterday. The projections for exports seem especially dire.

The analysts surveyed by the MAS tipped the economy to grow only 3.3 per cent this year, down from a forecast of a 3.8 per cent expansion made in a similar poll three months ago.

"The earlier optimism about a global recovery is dimming," DBS economist Irvin Seah said. "The economy is also struggling with a drag from restructuring."

Barclays economist Leong Wai Ho noted that the more downbeat projections were factoring in the economy's poor showing in April through June, which was worse than expected.

The economy grew only 2.4 per cent in the second quarter over the same period last year, far less than the 3.3 per cent expansion that private sector economists had predicted.

Mr Seah said Singapore companies continue to struggle with high costs from restructuring, which has weakened exports and could prevent the companies from benefiting from any global upswing in the near future.

Exports had earlier been expected to climb 4.1 per cent this year but economists are now projecting a 1.1 per cent slide. Exports had tumbled a worse-than-expected 6 per cent last year.

The outlook is now bleaker for nearly all parts of the economy, with economists lowering growth forecasts for sectors ranging from manufacturing and construction to food services and trade. The only sector left unscathed was finance and insurance.

Manufacturing, which makes up about a fifth of the economy, is expected to grow 4.2 per cent this year - down from an earlier forecast of 5.6 per cent growth.

Ms Adeline Wong, a senior director at Superworld Electronics, which makes components for products such as mobile phones and laptops, expects sales to be "stagnant" this year.

"We don't see as much of a pick-up in consumer spending this year as we used to," she said. "We're keeping lower inventories due to price competition for finished products."

However, some economists expect the industry situation to improve later this year.

Mr Leong thinks manufacturing could rally this quarter as electronics exports pick up across North Asia ahead of Christmas.

"There are signs that Christmas sales are going to be more brisk this year, consumers are more confident," he added.

"There's higher demand from the United States and slightly more from Europe - not just for iPhones but also for products such as game consoles.

"This Christmas is going to be a little more jolly."

Since factories in North Asia are running close to full capacity, the demand for electronics could spill over into Singapore and boost factory activity here, he said.

Economists believe economic activity will pick up next year, leading to GDP growth of 3.7 per cent, according to the MAS survey.

As for inflation, the economists trimmed their forecasts marginally. They predicted that overall inflation will rise 1.8 per cent for the year, down from the 2.2 per cent increase they had tipped in the earlier survey.

They also cut their projection for core inflation, which excludes accommodation and private road transport costs, to 2.2 per cent from 2.4 per cent.

However, Mr Seah pointed out that core inflation was higher than overall inflation, which signals that living costs remain high.

The Government last month narrowed its full-year growth forecast to between 2.5 per cent and 3.5 per cent from its previous projection of between 2 per cent and 4 per cent.

melissat@sph.com.sg