Singapore plagued by intensifying market contagion fears

Extreme volatility is the new norm.

Singapore’s growth will remain muted amid heightened economic volatility this year, according to a report by OCBC.

“Our full-year 2016 GDP growth forecast remains at 2-3%, which is at the upper end of the official 1-3% forecast. The economic spillover and market contagion effects from a sustained deceleration in China, coupled with market suspicions over the CNY policy, will likely continue to impart volatility to Asian market including Singapore,” OCBC said.

OCBC said that manufacturing, in particular, is likely to remain in contraction mode and drag down overall growth, particularly after its disastrous performance in 2015.

“We expect that manufacturing may continue to be handicapped and potentially shrink 0.2% yoy in 1Q16 and constrain overall GDP growth to 2.4% yoy,” said OCBC.
Recent surveys also showed no newfound optimism in the near-term, with the latest SME business surveys suggesting greater caution for the first half of this year.