Singapore economy to slow down in 2011:HSBC

HSBC believes Monetary Authority of Singapore will remain in tightening mode.

HSBC reported, the series is volatile and it does follow a big jump in January.

Much of the increase in production in anticipation of Chinese New Year would have taken place in January. In 2010 when the Chinese New Year fell in the middle of February, some of the pre-LNY frontloading would have taken place in February. This would appear to have impacted both y-o-y and m-o-m growth rates downwards this year, and more than expected.

HSBC said, while it is too early to make precise estimates of the impact of the tragic events in Japan, it is likely to have an impact on Singapore's exports and production in the short term. Assuming, however, that the nuclear threat in Japan is contained, growth in Japan should recover relatively quickly as reconstruction resumes and factories start up production again.

Even so, economic activity in Singapore, including industrial production, is expected to slow this year following last year's steep climb when the economy was boosted by the normalization in global trade. Also, unrest in the Middle East, if it lingers, and elevated oil prices could have an impact on sentiment in the months ahead. Despite the slowdown to a more sustainable pace of expansion, however, the economy is expected to continue to operate at or above its potential, keeping capacity tight. This is already adding to wage and inflation pressures, and higher international commodity prices are not helping either. MAS will, therefore, stay in tightening mode and is likely to re-center in April.