Economists raise GDP forecasts to 3.2% in 2018

They are more positive thanks to manufacturing growth but are also more worried by a possible global trade war.

Singapore economists expect the GDP growth to come in at 3.2% in 2018, the Monetary Authority of Singapore (MAS) survey of professional forecasters revealed. This is an upgrade from the 3% median forecast in the previous survey in December 2017.

The Singapore economy expanded by 3.6% in Q4 2017, higher than the median forecast of 2.6% reported in the previous survey.

Growth forecasts for manufacturing dipped from 5.5% to 4.3%, for finance it grew from 4.1% to 4.4%, for construction it stayed the same at 1%, for retail it rose from 2.2% to 3%, whilst for accommodation it inched up from 1.2% to 1.9%.

MAS noted that the electronics sector outperforming expectations remains the main potential upside for the economy, and is cited by 47% of respondents. “A generally positive outlook on external growth also continues to be another common upside risk in the survey results, at around 41%. There also appears to be increasing optimism on the property market, with a noticeable step up in the proportion of respondents citing it, from 27% in the previous survey to 41% currently,” it said.

Notably, economists are growing more worried over the global economy. “The possibility of a global trade war scenario present significant concerns for a large proportion, or 88%, of respondents. This is more than double that in the December survey. The threat of a slowdown in the Chinese economy is comparatively more subdued, at 53% of responses, down from 67% previously. Financial sector uncertainty due to global market movements, at 18% of responses, represents the third most common downside risk,” it added.

Private consumption forecasts have been raised from 2.2% to 3.1%. Non-oil domestic export (NODX) growth is expected to hit 5.5%, down from 5.8% in the December survey.

As reflected by the mean probability distribution, the most likely outcome is for the Singapore economy to grow by between 3.0 to 3.4% this year, up from the 2.5 to 2.9% range in the previous survey.

The median CPI-All Items and MAS Core Inflation forecasts for 2018 as a whole remain unchanged from 1.0% and 1.6%. As for the labour market, the respondents expect the unemployment rate to be 2.1% at year-end, unchanged from the previous survey.

Meanwhile, economists expect GDP growth to weaken in 2019 and reach 2.8%. On average, respondents estimate 2.5–2.9% to be the most likely growth outcome for the Singapore economy next year.

CPI-All Items Inflation is forecast to come in at 1.5% in 2019, while MAS Core Inflation is expected to be 1.8%.