15-12-2011, 06:52 AM
The Straits Times
Dec 15, 2011
Economists downgrade 2012 growth forecast to 3%
By Magdalen Ng
LOCAL economists have slashed their forecasts for next year but still expect Singapore's economy to expand about 3 per cent - the top end of the official government forecast range.
A group of 21 economists and analysts surveyed by the Monetary Authority of Singapore (MAS) has offered a more subdued outlook as Europe continues to face an impasse in dealing with its debt crisis.
Another key concern is that China may also post weaker growth.
In the MAS survey, the median forecast for Singapore's growth next year is 3 per cent, down from the 4.9 per cent figure in the same survey in September. The Government expects the economy to grow between 1 per cent and 3 per cent.
MAS said the 'most likely growth range', according to the survey, was 3 per cent to 3.9 per cent, down from the projection of 5 per cent to 5.9 per cent expected three months ago.
While there was still some optimism in September that Europe's crisis could be resolved, things have since taken a turn for the worse as European leaders struggled to reach a common political stance.
Credit Suisse economist Joseph Tan, one of those surveyed, downgraded his forecast from 4.5 per cent to 3 per cent.
He said: ' With each (European) summit that does not resolve the crisis, the credibility of their leaders erodes, and the threat of a recession becomes more real.'
The numbers could have been a lot uglier, if not for the better news coming out of the US and China.
Recent US indicators have exceeded market expectations. China looks likely to avert a hard landing, and is expected to grow at about 8 per cent next year.
On why private sector economists are more upbeat than the Government, OCBC economist Selena Ling said: 'The linchpin is really your view of Europe, and on the margins, also China. Our view is that Europe will muddle through.'
Bank of America Merrill Lynch economist Chua Hak Bin said Singapore's policymakers are now responding.
Dr Chua, whose estimate for the full-year growth is at 2.8 per cent, said: 'The MAS eased Singapore's monetary policy slightly in October, and there are hints of more fiscal responses.'
The central bank survey also indicated economists expect slower growth in most sectors next year, except in construction, and wholesale and retail trade sectors.
Both financial services and manufacturing may suffer sharp declines, it found.
The financial services sector is set to grow 4.2 per cent, down from a full-year forecast of 9.4 per cent this year.
Factory output could fall sharply from this year's 8.5 per cent, to 3.4 per cent. It is already suffering weakened demand from an ailing global economy, and a broad-based rise in costs - from a tighter labour market after measures restricting the number of foreign workers were introduced, and a spike in material costs.
While these two sectors will experience the sharpest falls, they are also likely to rebound the fastest in a recovery, which was what happened in 2009, noted DBS economist Irvin Seah.
The forecast for headline inflation among the economists was 3.1 per cent, up from 2.8 per cent in the last forecast.
While inflation is expected to ease over the long term, prices are easing slower than predicted. Lower vehicle quotas have driven up certificate of entitlement (COE) prices, and rental costs have also been persistently high.
Labour costs are also set to be higher with stricter foreign labour policies, and disruptions to supplies arising from the Thai floods may also drive up food prices.
The full-year forecast for this year has been revised downwards slightly by 0.1 percentage point, to 5.2 per cent. This is still higher than the official Trade and Industry Ministry forecast of 5 per cent.
Inflation for this year is expected by the economists to come in at 5.1 per cent, up from the 4.5 per cent in the previous survey; unemployment rate is forecast to fall from 2.2 per cent to 2.1 per cent.
songyuan@sph.com.sg
Dec 15, 2011
Economists downgrade 2012 growth forecast to 3%
By Magdalen Ng
LOCAL economists have slashed their forecasts for next year but still expect Singapore's economy to expand about 3 per cent - the top end of the official government forecast range.
A group of 21 economists and analysts surveyed by the Monetary Authority of Singapore (MAS) has offered a more subdued outlook as Europe continues to face an impasse in dealing with its debt crisis.
Another key concern is that China may also post weaker growth.
In the MAS survey, the median forecast for Singapore's growth next year is 3 per cent, down from the 4.9 per cent figure in the same survey in September. The Government expects the economy to grow between 1 per cent and 3 per cent.
MAS said the 'most likely growth range', according to the survey, was 3 per cent to 3.9 per cent, down from the projection of 5 per cent to 5.9 per cent expected three months ago.
While there was still some optimism in September that Europe's crisis could be resolved, things have since taken a turn for the worse as European leaders struggled to reach a common political stance.
Credit Suisse economist Joseph Tan, one of those surveyed, downgraded his forecast from 4.5 per cent to 3 per cent.
He said: ' With each (European) summit that does not resolve the crisis, the credibility of their leaders erodes, and the threat of a recession becomes more real.'
The numbers could have been a lot uglier, if not for the better news coming out of the US and China.
Recent US indicators have exceeded market expectations. China looks likely to avert a hard landing, and is expected to grow at about 8 per cent next year.
On why private sector economists are more upbeat than the Government, OCBC economist Selena Ling said: 'The linchpin is really your view of Europe, and on the margins, also China. Our view is that Europe will muddle through.'
Bank of America Merrill Lynch economist Chua Hak Bin said Singapore's policymakers are now responding.
Dr Chua, whose estimate for the full-year growth is at 2.8 per cent, said: 'The MAS eased Singapore's monetary policy slightly in October, and there are hints of more fiscal responses.'
The central bank survey also indicated economists expect slower growth in most sectors next year, except in construction, and wholesale and retail trade sectors.
Both financial services and manufacturing may suffer sharp declines, it found.
The financial services sector is set to grow 4.2 per cent, down from a full-year forecast of 9.4 per cent this year.
Factory output could fall sharply from this year's 8.5 per cent, to 3.4 per cent. It is already suffering weakened demand from an ailing global economy, and a broad-based rise in costs - from a tighter labour market after measures restricting the number of foreign workers were introduced, and a spike in material costs.
While these two sectors will experience the sharpest falls, they are also likely to rebound the fastest in a recovery, which was what happened in 2009, noted DBS economist Irvin Seah.
The forecast for headline inflation among the economists was 3.1 per cent, up from 2.8 per cent in the last forecast.
While inflation is expected to ease over the long term, prices are easing slower than predicted. Lower vehicle quotas have driven up certificate of entitlement (COE) prices, and rental costs have also been persistently high.
Labour costs are also set to be higher with stricter foreign labour policies, and disruptions to supplies arising from the Thai floods may also drive up food prices.
The full-year forecast for this year has been revised downwards slightly by 0.1 percentage point, to 5.2 per cent. This is still higher than the official Trade and Industry Ministry forecast of 5 per cent.
Inflation for this year is expected by the economists to come in at 5.1 per cent, up from the 4.5 per cent in the previous survey; unemployment rate is forecast to fall from 2.2 per cent to 2.1 per cent.
songyuan@sph.com.sg