Growth outlook still muted despite surprise GDP uptick

Due to the labour crunch and patchy global growth.

Singapore’s gross domestic product (GDP) beat expectations with a 2.1% growth in the fourth quarter, beating consensus estimates of a 1.5% growth.

In spite of the slight uptick, analysts caution that the country’s growth outlook is still muted for 2015. This is on back of the ongoing labour crunch and patchy global growth.

“This incorporates ongoing labour market tightening (another round is scheduled for July), less synchronized global GDP growth, construction investment growth slowing further as the residential property market continues to soften, and still weak private consumption growth as higher interest rates raise household debt servicing burdens,” stated Nomura.

Meanwhile, Bank of America Merrill Lynch notes that its growth forecast is pegged at 2.8%, on the weaker side of MTI’s forecast range.

“Manufacturing and exports are bearing the brunt of restructuring pains, accelerating the shift towards a more services-based economy. Further foreign labor tightening measures will kick in from 1 July. Labor productivity growth – which remained negative (-1.5%) in 4Q and averaged negative 0.8% in 2014 – remains disappointing, despite the government’s productivity initiatives. Productivity targets of 2% - 3% remains elusive and has not helped to offset slower labor force growth,” BofAML noted.