Uncertainties have clearly increased: MAS

GDP growth forecast range remains at 5 – 7% for now though, says Managing Director Ravi Menon.

During the MAS’ Annual Report press conference, he said economic growth took a sharp step-down in the second quarter following the strong performance in the first quarter.

The MAS Managing Director explained, "First, disruption to regional supply chains in the aftermath of the Japan earthquake was much more severe than expected. Second, the rise in oil prices due to the unrest in the Middle East and North Africa has put a dampener on global demand. Singapore’s trade-related sectors bore the brunt of impact. Both manufacturing output and re-exports saw sequential declines in Q2. In year-on-year terms, GDP growth averaged 4.7% in the first half of this year.”

There is more uncertainty in US and Europe compared to three months ago, said Menon, so the prognosis for global economy has taken on a more cautious tone.

“On balance, the Singapore economy should register moderate growth for the rest of this year. Some industry-specific factors that dragged down growth in electronics and pharmaceuticals are expected to be transitory and the manufacturing sector should pick up from the soft patch we saw in Q2. The services industries, especially financial and tourism-related activities, should remain firm due to strong regional demand,” he said.

MTI and MAS are reviewing Singapore’s GDP growth forecast, although for now they’re keeping the 5-7 % forecast range. If the pick-up from the downturn in the second quarter is weaker than currently expected, Menon said growth could come in at the lower half of the range.