Domestic Singapore economic momentum is expected to remain modest
Singapore’s GDP rose by 1.9% q-o-q saar (quarter-on-quarter seasonally-adjusted annualised rate) in Q3 2015, following a 2.6% decline in the previous quarter.
The growth partly reflected a pickup in oil-related trade, as declining oil prices spurred an increase in oil trading, transport & storage activities. The manufacturing sector however continued to languish on the back of persistent weakness in the electronics and marine & offshore engineering clusters.
Global growth is expected to improve in 2016, although downside risks remain in Asia Inventory destocking and sluggish investment in the G3 economies, as well as slowing Chinese demand in Asia ex-Japan dampened global growth in Q3 2015.
While the G3 are expected to remain on a modest expansion path as temporary headwinds dissipate, the near-term outlook for Asia ex-Japan is clouded by uncertainties, such as the impact from the impending US interest rate lift-off and China’s growth rebalancing.
Looking ahead, economic momentum in the domestic economy is expected to remain modest, and for the year as a whole, GDP growth is projected at close to 2% for 2015 and 1–3% for 2016.
A gradual improvement in the advanced economies should provide some support to pockets of trade-related industries, and partially offset the subdued regional demand. Meanwhile, domestic-oriented sectors will remain generally resilient despite ongoing supply-side constraints as firms continue to take steps to boost productivity.
MAS Core Inflation is expected to rise gradually over the course of 2016, as the effects of temporary disinflationary factors dissipate. Accordingly, MAS Core Inflation is projected to pick up to 0.5–1.5% in 2016, after coming in around 0.5% in 2015. CPI-All Items inflation should average between –0.5 and 0.5% in 2016, compared to around –0.5% in 2015. ■