Outlook Remains Dim On Sluggish Exports And Rising Interest Rates

Economic Research	6 December 2016
Singapore
Economic Outlook
Outlook Remains Dim On Sluggish Exports And Rising Interest Rates Singapore’s economy is set for another challenging year in 2017, as a recap of the 2013 currency turbulence amongst regional peers and rising interest rates sap demand. We forecast for GDP to slow to +1.2% in 2017, from an estimated 1.4% this year. Economic growth to slow in 2017; undermined by: i. Sluggish external demand, benefits from developed countries’ shift to fiscal stimulus is likely to lag, whereas, the impact of rising inflationary expectations in the US is causing unwanted turbulence in regional economies ii. Increased borrowing costs, Singapore Interbank Offered Rate (SIBOR) is expected to climb in tandem with rising US interest rates, dampening consumer spending and business profits iii. Reduced investment. Capital inputs have contracted this year, which would constrain 2017 growth Manufacturing sector expected to contract. This is in tandem with weak exports, whereas the services sector, on the whole, is projected to stabilise. Construction activities set to speed up on ramp-up of ongoing public infrastructure work. No change to the monetary policy. We expect for the Monetary Authority of Singapore (MAS) to not alter the Singapore dollar nominal effective exchange rate (S$NEER) slope in 2017, but believe there is a moderate chance of a recentring of the band, probably in April. SGD expected to trade at around 1.42 to the USD in 2017. This is on account of US interest rate hiking cycle gains momentum during the year. Economist:  Ng Kee Chou | +603 92802179