Some economists cut full-year growth forecasts
A general view of the skyline in the central business district of Singapore. Reuters file photo
SINGAPORE — The disappointing report card for Singapore’s economy in the second quarter has led some economists to downgrade their full-year growth forecasts while investors did not appear overly concerned.
Despite the economy growing a sharply-lower-than-expected 1.7 per cent in the April-to-June quarter from the corresponding period a year earlier, Singapore shares rose 0.2 per cent to close at 3,316.50 in a quiet session, with sentiment helped by Monday’s (July 13) tentative Greek debt deal.
The Singapore dollar, however, slumped to a one-month low, falling 0.4 per cent to S$1.3622 versus the greenback, its weakest level since June 8, Reuters reported.
DBS economist Irvin Seah said: “The outlook for the year remains cloudy given the risks in the global economy and the divergence in monetary policy directions. Domestic restructuring and the resulting labour shortage will weigh on growth.
“We have revised downwards our 2015 growth forecast to 2.4 per cent from 3.2 per cent. This will be the slowest growth since the global financial crisis of 2008/09 … We have also cut our forecast for 2016 growth to 2.9 per cent, from 3.5 per cent previously,” he added.
In a research note, UOB economists Francis Tan and Jimmy Koh said: “As we enter the second half of this year, the external environment continues to be uncertain, with recent concerns centring back on Greece and thus the resurgence of political-economic uncertainties in the eurozone. The drag from China’s economic slowdown continues and current deflationary pressures around the world may hinder Singapore’s second-half growth prospects.”
Taking into account the performance of the first half of the year and these uncertainties, they lowered their growth forecast for Singapore this year to 2.5 per cent from the earlier 2.9 per cent.
“If the external environment remains challenging, Singapore may end up at the lower range of the official forecasted growth rate of between 2 and 4 per cent,” warned Dr Tan Khay Boon, senior lecturer for SIM Global Education. The Ministry of Trade and Industry had in May maintained its full year growth forecast at 2 to 4 per cent.
However, OCBC’s head of Treasury Research & Strategy, Ms Selena Ling, remains cautiously optimistic. “Looking ahead, we will be watching for early indications of a modest manufacturing improvement, but maintain our full-year growth forecast at 2.5 per cent for this year for now.”
The manufacturing and electronics Purchasing Managers Indices have improved last month, suggesting an uptick in sentiment, especially in the new orders pipeline, Ms Ling said.
“We anticipate that manufacturing growth will rebound from the soft first half of the year to eke out positive growth in the second half, and boost full-year manufacturing growth back to positive territory, albeit at a relatively subdued growth on-year increase of 0.5 per cent.”
