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Singapore’s Q3 GDP growth upwardly revised, inflation likely to rise in November

Singaporean economic growth was upwardly revised from its initial advanced reading for the third quarter of 2017. The sequential growth was upwardly revised to 8.8 percent from the initial advanced reading of 6.3 percent. The year-on-year growth was revised from 4.6 percent to 5.2 percent. Therefore, the Ministry of Trade and Industry have upgraded their GDP growth projection to 3 percent to 3.5 percent for this year from 2 percent to 3 percent previously. The MTI expects GDP growth to come in at 1.5 percent-3.5 percent next year.

According to an ANZ research report, the Singaporean economy is likely to expand 3.3 percent in 2017 and 4 percent in 2018, which is at the top end of market expectations currently. The rise in activity is becoming more widespread and overall financial conditions continue to be very supportive of growth.

In spite of the upward revisions to economic growth outlook, the central bank, MAS, continues to believe the current monetary policy stance as appropriate. The MAS is expected to exit the neutral policy stance only during its October 2018 meeting, stated ANZ. The October inflation data affirms the absence of inflation pressure, with core rate stable at 1.5 percent. It will be sometime before stronger economic growth feeds through into inflation pressure given the current slack in the labor market.

The headline inflation print came in at 0.4 percent year-on-year, with no major surprises in terms of the composition. The 0.3 percent drop for month was because of the 2.2 percent sequential decline in accommodation costs stemming from the service and conservancy charges rebate and soft rentals. The headline inflation is expected to rise in November, given the increased petrol and COE prices; however, it is likely to soften back in the first quarter of 2018 because of the timing of the S&CC rebate, added ANZ. Low inflation currently permits the central bank to stay patient and keep monetary policy at neutral for a while.

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