Surge in exports no cause for joy, experts warn

Risks abound from high debt, rising interest rates.

Singapore impressively outperformed dreary economic forecasts in December, with latest export data booking a strong 9.4% increase. However, analysts warn that the outperformance does not mean that the domestic economy is finally out of the woods.

“Even if exports and GDP outperform our forecasts, domestically oriented and interest rate sensitive sectors may underperform in 2017 on headwinds from elevated debt levels and rising interest rates, amidst continued job market slack – a classic dual economy scenario,” Citi noted in a report.

Citi highlighted MAS Managing Director Ravi Menon’s cautiously optimistic tone in his recent speech, in which it was noted that significant risks remain from trade restrictions, tightening global financial conditions from Fed hikes, and potential stresses in the regional corporate sector.

“MAS’s cautiously optimistic tone suggests a Jan inter-meeting easing is unlikely, and the case for further easing has weakened. Nonetheless, MAS’ downward re-centring remains possible in the event of a full blown materialization of protectionist measures, which could lead to renewed broad-based economic contraction, given significant exposure to US final demand and FDI,” the report added.