GDP expansion feared to slacken in 2018

No thanks to a looming end in the semiconductor super-cycle.

Singapore’s GDP is set to slow down in 2018, in tandem with a moderation in exports. According to RHB, this would be due to a much higher base effect and the end of the semiconductor super-cycle.

However, RHB believes the magnitude of moderation would not be as extreme as consensus anticipates, as domestic demand is set to rebound this year.

This would be boosted by a rebound in the residential market and regulation-driven machinery upgrades, as well as continued upside momentum for consumer spending.

Here's more from RHB:

Overall, we forecast for the island’s GDP to grow 3% in 2018, from an estimated +3.3 this year. Manufacturing activities are likely to ease in 2018 on moderating electronics output. However, demand for machinery and chemicals are set to improve, while production in the pharmaceutical and marine offshore clusters should recover from low bases this year.

Services providers are expected to moderate slightly. This is as increased tourist arrivals and the pick-up in private consumption help offset softer growth in the export-oriented sectors.

Budget FY18 (Mar) projected to be mildly expansionary. Reduced need for small and medium enterprise (SME) assistance and rising revenue collection should result in a higher fiscal surplus of 0.8% of GDP.

Positive inflation trend to continue in 2018, underpinned by a modest demand pull, a recovering property market, and higher utility costs. The Monetary Authority of Singapore (MAS) is not expected to tighten monetary policy in April, as the risk of tightening too quickly greatly outweighs the benefits. However, an increase in the SGD nominal effective exchange rate (S$NEER) slope may be on the cards in October, if the economy continues to do well.