Growth downgrades haunt Singapore as manufacturing rut deepens

Fourth-quarter GDP growth will be trimmed, experts warn.

The worse-than-expected factory output contraction in December will trigger a downward revision of Singapore’s fourth-quarter headline economic growth figure, according to a report by Bank of America Merrill Lynch.

BofAML warned that fourth quarter GDP growth will likely be revised down a notch to +1.8% year-on-year, from the Ministry of Trade and Industry’s (MTI) flash estimate of +2% year-on-year.

Singapore’s industrial production dropped 7.9% in December, bringing the fourth quarter average to -6.6%. This is also worse than flash GDP estimates of a 6% contraction.

“Manufacturing performance came in worse than expected, and was lower than what the flash estimate implied. We think services growth may also revised lower from the flash estimate of +3.2% yoy. Several indicators suggest weakness across key services segments,” said the report.

Although BofAML expects the Monetary Authority of Singapore (MAS) to maintain its current 'mild' modest and gradual S$NEER appreciation stance, the report notes that the odds of an easing is on the rise if services growth falters as well.

“We are increasingly concerned that services growth may not hold up in the face of an intensifying manufacturing recession. We now see non-negligible risk of a technical recession,” said the report.