Jun 13, 2013

    Economists expect slower S'pore growth

    ECONOMISTS have become less optimistic about the growth of Singapore's economy, although its first-quarter gross domestic product (GDP) came in much better than expected, partly due to a surge in financial services.

    The Monetary Authority of Singapore's (MAS') latest quarterly Survey of Professional Forecasters shows economists now expect GDP growth of 2.3 per cent for this year, slower than the median estimate of 2.8 per cent in March.

    Singapore's official forecast is for growth of 1-3 per cent this year, suggesting a slightly better performance than last year's 1.3 per cent.

    While growth in the finance industry is expected to surge, the growth projections for manufacturing, and wholesale and retail trade have been downgraded.

    But Singapore's inflation this year is expected to come in below the central bank's forecast of 3-4 per cent, a sign that rising prices have become less of a concern after two years of cost pressures.

    The MAS survey found that economists now expect the city state's consumer price index to rise by 2.8 per cent this year, a full percentage point below the median estimate of a 3.8 per cent gain in the previous poll.

    Inflation is expected to pick up again next year to 3.1 per cent, the survey released yesterday showed. Thus many forecasters believe the central bank will continue to keep monetary policy tight when it publishes its next half-yearly policy statement in October.

    "Even though inflation will be lower than last year's average, it's still on the high side relative to historical trends, so there shouldn't be any change in the October policy," said Mr Francis Tan, an economist at Singapore's United Overseas Bank.

    Mr Tan said that the MAS has indicated core inflation will pick up later this year, and he noted that car prices have begun edging higher after falling in March and April on tougher financing rules.

    The MAS' core-inflation measure, which excludes housing and private car prices that are more influenced by government policy, will likely come in at 1.8 per cent this year, down from the previous median estimate of 2 per cent. But the survey also showed that economists expect core inflation to edge up to 2 per cent next year.

    Singapore's inflation was 4.6 per cent last year and 5.2 per cent in 2011.

    The MAS conducts its survey every quarter after the release of detailed economic data for the preceding three-month period.

    With the dollar strengthening against most Asian currencies in recent months on signs of a firmer recovery in the world's largest economy, forecasters now expect the Singapore dollar to end the year at 1.25 to the US currency, from 1.20 in the previous survey.