Short-term policy to support growth remains unlikely this year: Nomura

It's deemed unnecessary with stronger-than-expected economy.

Q4 GDP growth was revised up to 1.5% y-o-y from the flash estimate of 1.1%, bringing full-year 2012 growth to 1.3%
from 5.2% in 2011

On a sequential basis, the economy grew by 3.3% q-o-q saar in Q4 from -4.6% in Q3.

The government‟s forward guidance remains cautious, as it maintained its growth forecast of 1-3% for 2013.

Consistent with this view, Nomura maintains it forecast of GDP growth at 2.4% this year and expects no change in policy focus.

Here's more from Nomura:

Q4 GDP growth was revised to a higher-than-expected 1.5% y-o-y from the flash estimate of 1.1% (Consensus: 1.2%; Nomura: 1.3%).

On a sequential bias, the economy grew by 3.3% q-o-q saar from -4.6% in Q3. The upward revision was largely the result of a lower decline in manufacturing output (-1.1% y-o-y versus the flash estimate of -1.4%) due to strong December industrial production.

Growth in the construction sector remained strong at 5.8% y-o-y in Q4 from 6.7% in Q3, supported by both public and private building activities.

Growth in the services sectors rose by 1.7% y-o-y in Q4 from flat growth in Q3, as growth in the transportation & storage, finance and business services sectors offset weakness in the wholesale and retail sectors.

On the demand side, private consumption grew by 2.0% y-o-y in Q4 from 0.5% in Q3, consistent with improving wage growth and tight labour markets, while investment spending increased 5.8% y-o-y from -3.8% in Q3. Government spending continued to decline, falling by 4.6% y-o-y in Q4 from -2.4% in Q3, in line with our expectations.

Given inventories‟ large contribution of 10.3 percentage points (pp), total domesticdemand‟s contribution to headline GDP growth increased to 12.8pp.

Unsurprisingly, export growth continued to decline in Q4 inlight of the weak global backdrop, while imports rose by 3.5% y-o-y. As a result, net exports reduced headline GDP growth by 11.4pp.

For full year 2012, the economy grew 1.3% y-o-y from 5.2% in 2011, below the government‟s forecast of about 1.5%.

For 2013, the government maintained its growth forecast of 1-3%. This reflects a still-cautious assessment of the external environment but also suggests that domestic policy settings will remain tight. With the economic restructuring taking priority, we think short-termpolicy support to growth remains unlikely this year.

Indeed, we expect the FY13 budget announcement on 25 February to say as much. We also remain comfortable with our view that the Monetary Authority of Singapore will leave unchanged its policy of a modest and gradual appreciation of the S$NEER policy band at the next announcement in April. We reiterate our 2013 GDP growth forecast of 2.4%.