15-10-2011, 08:50 PM
The Straits Times
Oct 15, 2011
Govt expects 5% GDP growth
Figure is at lower end of forecast as S'pore narrowly avoids technical recession in Q3
By Aaron Low
A RAPIDLY slowing global economy has prompted the Government to narrow its growth forecast for the year, putting it at 'around 5 per cent' - the lower end of its earlier 5 to 6 per cent prediction.
And next year is looking worse.
The Monetary Authority of Singapore (MAS) warned yesterday that economic growth in 2012 could even be below the country's potential long-term rate of between 3 and 5 per cent.
Forward looking indicators are already showing that new factory orders are on the decline, while surveys show business sentiment and confidence are dropping.
Gloomy predictions like these dominated yesterday's release of flash estimates for third-quarter economic growth by the Ministry of Trade and Industry (MTI).
This is despite the fact that a surge in drug and pharmaceutical production boosted Singapore's economy to a better-than-expected showing.
Drug factories helped Singapore narrowly avoid a technical recession and post 5.9 per cent growth in the three months till September compared with the same period last year.
But leaving pharmaceuticals aside, signs of weakness were clear across the rest of the economy. Analysts noted that even though services and construction both grew compared to the same time last year, their quarter-on-quarter readings - which indicate the momentum of growth - registered declines.
In particular, the services sector, which makes up two-thirds of the economy, fell 0.7 per cent, the first such contraction in more than two years.
Transport and storage and financial services both saw 'relatively lower levels of activity' compared to the previous three months, said MTI. Likewise, construction also fell 11.5 per cent compared to three months ago, due to falling private sector building activities.
HSBC economist Leif Eskesen said that part of the slowdown is temporary in nature, as the effects from the supply-chain disruption related to the Japan natural disaster is beginning to dissipate.
'However, the global slowdown goes beyond that, reflecting also the negative impact on final demand in advanced economies from the elevated fuel prices earlier in the year, although they are now coming off,' he said.
MTI warned that growth for the rest of the year could be further weighed down by weak global economic conditions. It flagged the electronics sector as likely to be the worst hit, while 'sentiment-sensitive activities within the financial services sector could also be dampened'.
Economists have started downgrading their forecasts.
Among them is Bank of America Merrill Lynch economist Chua Hak Bin, who cut his 2012 forecast from 4.3 to 3.2 per cent. He said the economic outlook ahead was 'quite dim', and this does not even take into account the risks from a wider financial crisis should Europe falter.
DBS economist Irvin Seah also warned that drug production is unlikely to keep growing at these levels and will taper off in the next six months. 'This, compounded with the decline in the other manufacturing segments, will imply slower growth ahead,' he said, adding that he has cut next year's growth forecast to 3.5 per cent from 5 per cent earlier.
Likewise, domestic demand, another pillar of support for the economy so far, will also likely falter as the global slowdown eventually tempers spending in the region, said Dr Chua.
Yesterday, figures from the Department of Statistics showed that retail sales slid 7.2 per cent in August, compared to July.
Economists said the next thing to watch out for would be the impact on the job market.
OCBC economist Selena Ling said she expects unemployment to edge up slightly but, unless a financial crisis hits, not a wave of retrenchments.
'You might see less of a rush for professionals as well as bonuses being cut back,' she said.
The silver lining in all this is that inflation, which has been running at near two-year highs, will likely cool in the coming quarters. MAS said yesterday in its bi-annual Monetary Policy Statement that while inflation should come in around 5 per cent for this year, the coming slowdown should reduce tightness in the labour market and alleviate price pressures.
'Inflationary pressures emanating from abroad should also subside,' said MAS, adding that inflation should be between 2.5 and 3.5 per cent in 2012.
aaronl@sph.com.sg
Oct 15, 2011
Govt expects 5% GDP growth
Figure is at lower end of forecast as S'pore narrowly avoids technical recession in Q3
By Aaron Low
A RAPIDLY slowing global economy has prompted the Government to narrow its growth forecast for the year, putting it at 'around 5 per cent' - the lower end of its earlier 5 to 6 per cent prediction.
And next year is looking worse.
The Monetary Authority of Singapore (MAS) warned yesterday that economic growth in 2012 could even be below the country's potential long-term rate of between 3 and 5 per cent.
Forward looking indicators are already showing that new factory orders are on the decline, while surveys show business sentiment and confidence are dropping.
Gloomy predictions like these dominated yesterday's release of flash estimates for third-quarter economic growth by the Ministry of Trade and Industry (MTI).
This is despite the fact that a surge in drug and pharmaceutical production boosted Singapore's economy to a better-than-expected showing.
Drug factories helped Singapore narrowly avoid a technical recession and post 5.9 per cent growth in the three months till September compared with the same period last year.
But leaving pharmaceuticals aside, signs of weakness were clear across the rest of the economy. Analysts noted that even though services and construction both grew compared to the same time last year, their quarter-on-quarter readings - which indicate the momentum of growth - registered declines.
In particular, the services sector, which makes up two-thirds of the economy, fell 0.7 per cent, the first such contraction in more than two years.
Transport and storage and financial services both saw 'relatively lower levels of activity' compared to the previous three months, said MTI. Likewise, construction also fell 11.5 per cent compared to three months ago, due to falling private sector building activities.
HSBC economist Leif Eskesen said that part of the slowdown is temporary in nature, as the effects from the supply-chain disruption related to the Japan natural disaster is beginning to dissipate.
'However, the global slowdown goes beyond that, reflecting also the negative impact on final demand in advanced economies from the elevated fuel prices earlier in the year, although they are now coming off,' he said.
MTI warned that growth for the rest of the year could be further weighed down by weak global economic conditions. It flagged the electronics sector as likely to be the worst hit, while 'sentiment-sensitive activities within the financial services sector could also be dampened'.
Economists have started downgrading their forecasts.
Among them is Bank of America Merrill Lynch economist Chua Hak Bin, who cut his 2012 forecast from 4.3 to 3.2 per cent. He said the economic outlook ahead was 'quite dim', and this does not even take into account the risks from a wider financial crisis should Europe falter.
DBS economist Irvin Seah also warned that drug production is unlikely to keep growing at these levels and will taper off in the next six months. 'This, compounded with the decline in the other manufacturing segments, will imply slower growth ahead,' he said, adding that he has cut next year's growth forecast to 3.5 per cent from 5 per cent earlier.
Likewise, domestic demand, another pillar of support for the economy so far, will also likely falter as the global slowdown eventually tempers spending in the region, said Dr Chua.
Yesterday, figures from the Department of Statistics showed that retail sales slid 7.2 per cent in August, compared to July.
Economists said the next thing to watch out for would be the impact on the job market.
OCBC economist Selena Ling said she expects unemployment to edge up slightly but, unless a financial crisis hits, not a wave of retrenchments.
'You might see less of a rush for professionals as well as bonuses being cut back,' she said.
The silver lining in all this is that inflation, which has been running at near two-year highs, will likely cool in the coming quarters. MAS said yesterday in its bi-annual Monetary Policy Statement that while inflation should come in around 5 per cent for this year, the coming slowdown should reduce tightness in the labour market and alleviate price pressures.
'Inflationary pressures emanating from abroad should also subside,' said MAS, adding that inflation should be between 2.5 and 3.5 per cent in 2012.
aaronl@sph.com.sg