Singapore’s government forecasts 2019 GDP growth at 1.5-3.5 oct y/y, narrows 2018 forecast to 3-3.5 pct: OCBC Treasury Research

The Singaporean government has forecast 2019 GDP growth at 1.5-3.5 percent y/y, while narrowing the 2018 growth forecast to 3-3.5 percent versus the earlier 2.5-3.5 percent y/y forecast, according to the latest report from OCBC Treasury Research.

With the first three quarters already standing at a relatively robust 3.6 percent y/y, any moderation in Q4 this year is likely to be accommodated as outward-oriented sectors like manufacturing and finance & insurance should continue to expand by at a more modest pace. 

The choice of a 1.5-3.5 percent forecast range is also appropriately neutral compared to say a hypothetical 2-4 percent (which would imply 2019 upside risks beyond the upper limit of the 3-3.5 percent growth range in 2018) or even 1-3 percent (whereby the lower floor would herald a more immediate downshift in momentum from here).

The economy expanded by a slower than expected 2.2 percent y/y (3.0 percent q/q saar) in Q3 2018, which is a downward revision of the earlier flash estimates of 2.6 percent y/y (4.7 percent q/q saar).

The main revision came from manufacturing (Q3 now at 3.5 percent y/y versus 4.5 percent flash) and services (2.4 percent versus flash estimate of 2.9 percent y/y), whereas construction shrank less than initially tipped (-2.3 percent versus -3.1 percent y/y).

There was also no change to the official inflation projections from October, which suggests that recent incoming economic indicators have not tilted the balance as far as the official comfort zones are concerned, the report added.

IESingapore also revised its 2018 NODX forecast to 5.5-6.0 percent, but tips 2019 at 0-2 percent y/y. The external demand outlook is likely to be slightly weaker in 2019, with the manufacturing sector to see a more modest expansion.

"Our house forecast for 2019 GDP growth is 2.7 percent y/y, which is a slowdown from the 3.3 percent y/y this year. Q4 2018 GDP growth is likely to come in slightly below the 2 percent handle, but will not detract too much from full-year 2018 growth. We see 2019, especially H2 2019, as potentially posing a more challenging growth trajectory, mainly arising from the expected US growth moderation (note that fiscal stimulus will fade and monetary policy is tightening further, potentially to neutral or slight beyond neutral settings), while weaker demand conditions in the global semiconductor cycle and moderation in growth in key markets including ASEAN may dampen activity in wholesale trade, transportation & storage and finance & insurance sectors," OCBC Treasury Research commented.