Singapore’s economy burdened by higher costs and deteriorating productivity in 2015

Change doesn’t come easy.

Private consumption is expected to be a drag on growth, compounded by the decline in property prices.

According to a report by HSBC, investment has been weak and will likely continue in 2015. To counteract this, increased government spending alongside Singapore’s 50th anniversary and corresponding policy initiatives - such as the Pioneer Generation Package of elderly healthcare subsidies – will contribute to an expansionary fiscal stance. Accelerating the progress of infrastructure projects delayed from last year may also help. Lastly, even if still below trend, net export growth should fare better in 2015.

Here’s more from HSBC:

From the supply side, the services sector may feel some pressure as firms debate between passing on costs to consumers or potentially curtailing expansion. Manufacturing growth should stay steady from 2014 if NODX stabilises – abetted by the dissipation of the electronics base effect.

That said, the elevated SGDREER exchange rate should accelerate the restructuring of externally focused sectors, weeding out the weakest links.