Singapore full-year 2017 GDP growth likely to exceed the 3 pct y/y handle, says OCBC Treasury Research

Singapore’s full-year 2017 GDP growth could potentially exceed the 3 percent y/y handle depending on how Q4 2017 growth materializes, and 2018 growth could be in a 2-4 percent range (midpoint 3 percent), supported by broader engines of growth apart from electronics and productivity gains, even as the global economic recovery matures.

The window for any MAS monetary policy adjustment remains open in April and October 2018 depending on how the economic and price stability picture evolves over the next six months, especially with the G7 central banks increasingly jumping on the policy normalization bandwagon.

As anticipated, MAS will maintain the rate of appreciation of the SGDNEER policy band at zero percent, with no change to the width of the policy band and the level at which it is centered. The surprise was how dovish the MAS statement read. Basically, MAS sees growth as steady but likely to slow slightly from this year, and more importantly, headline and core inflation outlook is tipped at a modest 0-1 percent and 1-2 percent y/y in 2018. 

MAS also noted that core inflation is expected to trend towards but average slightly below 2 percent over the medium term. All these essentially reinforces that there is no need to jump the gun on tightening now, even as it leaves the adjustment window open in 2018.

"Our headline and core inflation forecasts are 0.6 percent and 1.3 percent y/y respectively for 2017 but should edge up modestly to 0.8 percent and 1.5 percent in 2018. The key to watch would be the domestic labor market conditions, which currently remains subdued," OCBC Treasury Research commented in its latest report.

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