Private consumption growth to average 4.3% by 2020: BMI

It constitutes an uncharacteristically low fraction of Singapore’s economy.

Given its high level of development, private consumption constitutes an uncharacteristically low proportion of Singapore's economy at just 37.4% in 2015.

However, a report by BMI Research said this will increase gradually throughout the coming years as private consumption growth outpaces headline real GDP growth amid a tight labour market and strong real wage gains.

“We forecast real private consumption growth to average a robust 4.3% per annum through to 2020, bringing private consumption as a share of the economy to 40.7% by the end of our forecast period,” BMI Research noted.

Meanwhile, the report said despite relatively steady private consumption and impressive labour dynamics in the face of a headline GDP growth slowdown, the Singaporean economy continues to face challenges that could impact further on consumer sentiment.

“One such challenge is high levels of debt, with household debt now standing at roughly 150% of household income; this is the second highest in the region behind Malaysia. There will undoubtedly be repercussions for lower-income households as well as those that have leveraged themselves aggressively (in order to take part in the country's housing boom) once global interest rates begin to normalise,” the report added.