Singapore's November IP dropped 5.5% yoy, which was much below expectations. On a seasonally adjusted month on month basis, the output dropped 3.6% mom sa, reversing the gains of September and October.

The headwinds of persistently weak external demand and a slow inventory adjustment are likely to  keep Singapore's growth momentum subdued in 2016.

The moderate outlook of external growth, which is exerting a pull back on domestic industrial sector, is consistent with the Ministry of Trade and Industry's assessment of domestic growth being resilient in a challenging external environment. 

MTI expects growth to be close to 2.0% for 2015 and 1-3% in 2016 in the absence of a meaningful external uplift. While the near-term outlook is still challenging, policy is tilting increasingly toward ensuring medium- to long-term competitiveness. 

"The MAS remains firmly focused on the key medium-term inflation driver - the tight labour market - a view the MTI echoed in its statement. Unless there is a systemic shock, we expect no change policy in the April 2016 MPS", says Barclays in a research note.