Friday, April 14, 2017

MAS Stays Pat After Modest 1Q17 GDP Growth

Economic Research
14 April 2017

Economic Update

Based on advanced estimates, Singapore’s economy declined 1.9% QoQ in 1Q17, seasonally adjusted (SA) and annualised, correcting from a 12.3% surge the previous quarter. Manufacturing and services activities contracted after spiking in 4Q16, whereas construction output picked up, cushioning some of the fall. Going forward, we maintain our projection for Singapore’s GDP to grow 2.2% in 2017, from +2% last year, backed by:
1.    Higher manufacturing output, underpinned by robust semiconductor, chemicals and capital goods demand;
2.    Increased growth for export-facing (wholesale trade, logistics, and finance), as well as IT and communications service providers.

Despite the pick-up, construction work is set to remain muted, as businesses are still facing a lot of structural headwinds, which would deter investments, in our view. In addition, the property market would need to digest an oversupply of residential and commercial properties coming online this year.
The Monetary Authority of Singapore (MAS) maintained the slope and width of the SGD nominal effective exchange rate (S$NEER) policy band. We envisage for MAS to stay pat on monetary easing at the next meeting in October as well. However, depending on the pace of decline in property prices, we believe that there is a moderate chance for further easing in property purchase curbs.

Economist:  Ng Kee Chou | +603 92802179

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