Singapore growth to dwell in slow-paced limbo?

That is the forming consensus with RBS predicting an averted crash followed by a prolonged rebound.

The assessment was made after Singapore announced its Q4 GDP at a 2.5%qoq contraction, which is better than the previous worst case estimates as the manufacturing slowdown seems to be hitting a bottom.

RBS pegs the 2012 GDP to grow at a lukewarm 1.9% due to a mixed bag of positive indicators like tourism growth and negative indicators like still-vulnerable manufacturing output.

Here's more from RBS:

In post-GDP comments, a government official also added that although near-term indicators are not pointing at an "imminent rebound", there was at the same time no imminent danger of recession either, with tourism-related industries possibly supporting growth going forward.

We agree with this assessment - our GDP growth forecast of 1.9% for this year does not embody a recession, but simply a sub-trend pace of sequential growth in 1H followed by a return towards trend (of around 1.4%qoq) in 2H. Barring an unexpected shock emanating from Europe or oil prices, this trajectory does not seem unrealistic.

Purchasing Managers' Indices (PMIs) across Asia, Europe and the US are now telling us that in many places the slide in manufacturing activity found a bottom around November, and is now in the midst of a nascent upswing on the back of higher orders. Singapore's PMI hasn't yet shown such a bottoming out, but as mentioned above, trade and industrial production data are starting to. Even after stripping out the highly volatile biomedical component from the December data, the slide in the manufacturing and export data is starting to stabilize or even recover gradually, with improvement also seen in electronics for the first time in a year.

With this in mind, it now seems to us that the odds of MAS easing policy further in April are ebbing. The central bank indicated as much today, with a key official telling reporters that the current monetary policy stance remains appropriate (according to our estimates the SGD NEER band is currently set at an annualized slope of 2%, with the upper and lower bounds at +/-3% from the mid-point).

The government also reiterated their 2012 inflation forecast of 2.5-3.5%, noting that inflation may ease in the second half. We think that inflation could average near the top-end of that range, given few signs that the month-on-month momentum in the headline is cooling. We would, however, emphasize that by contrast, 'underlying' inflation has been stable at around 0.2%mom (seasonally adjusted). MAS currently views the latter as a more accurate gauge of 'true' inflationary pressure, on the (arguable) view that it strips out car registration costs as well as imputed rent (the thinking being that most Singaporeans don't own cars and also don't rent).