Challenging outlook persists for Singapore despite positive GDP print in Q3

Don’t pin your hopes on the volatile services sector.

Singapore’s future remains challenging despite the positive GDP growth recorded in the third quarter. According to HSBC, the country will continue to be impacted by the interplay of domestic restructuring and slow global growth.

HSBC notes that the Q3 GDP figure was boosted by a pick-up in the services sector, but this robust growth will be difficult to sustain thanks to the tight labor market.

Domestic consumption will also remain sluggish, on back of the strong negative wealth effect from the government's property cooling measures.

“While the pick-up in sequential momentum is comforting, some of the details are less encouraging. From a demand perspective, private consumption slowed to almost a 2-year low, while labour productivity growth in 3Q continued to contract as unit labour costs increase. We see slight downside risks to our 2014 and 2015 GDP forecasts of 3.1% and 3.5%; but nonetheless still expect the MAS to maintain policy settings barring a significant further deceleration in core CPI into 1H15,” noted HSBC.