Private consumption forecast to inch up 1.1% in 2017

It’s a slight increase from the 0.6% growth in 2016.

According to RHB, private consumption declined sharply at the end of 2016, contributing to sluggish demand domestically but the situation is set to improve, on the back of improved economic growth, higher tourist arrivals, and supportive Government measures, including:

i. Increased transfers to lower-income households;
ii. Expanded personal income tax rebates;
iii. Extension of wage hike subsidies for low- to mid-level salaried workers;
iv. Extension of old-aged workers’ wage subsidies and age limit, as well as an increase in preschool intake capacity – measures which are designed to eke out further growth in the labour force.

Here’s more from RHB:

On the other hand, rising inflation and mortgage repayment would crimp disposable income, whilst softening labour conditions would likely lead to slower wage gains, capping some of the gains.

All things considered, we expect private consumption to grow at an anaemic pace of 1.1% in 2017, up slightly from its 0.6% rise last year.

Finance Minister Mr Heng Swee Keat delivered a mildly expansionary Budget 2017 in February, setting the tone for a slight increase in Government spending. Spending is expected to increase for household transfers, whilst assistance to SMEs and distressed sectors of the economy is to continue.

However, public spending is set to be capped by muted revenue collection growth, as well as the Ministry of Finance’s directive for most Government organs to cut their budgets by 2%. As a result, Government consumption spending is predicted to only improve slightly to 6.8% in 2017, from +6.3% the year before.