Singapore’s real GDP grows 0.8 pct y/y in Q4; economy likely to continue recovery, says Oxford Economics

Advance estimates show that Singapore’s economy expanded at a modest pace with the GDP increasing 0.8 percent y/y (0.1 percent q/q saar) in Q4, after narrowly avoiding a technical recession the previous quarter. The service sector grew 1.4 percent y/y, while the manufacturing sector continued to contract (-2.1 percent y/y), Oxford Economics reported.

Today’s outcome was in line with view, and Oxford Economics mainatins forecast of 1.4 percent GDP growth in 2020. The external outlook has improved with the US-China "phase 1" trade deal, but the risk of relations deteriorating again remains substantial.

On the domestic front, labour market conditions are softening as firms are more cautious about hiring and unemployment rate has been rising steadily since last year.

"With the gradual recovery in growth, we expect the MAS to maintain the slope of the SG$NEER trading band, which was slighted reduced in October. We still forecast a fiscal expansion in 2020, including some targeted measures to help offset the planned GST hike and support ailing industries," the report further commented.

Meanwhile, a solid growth in the service sector more than offset the decline in the manufacturing activity.

"We think the economy will continue to recover, but at its slowest pace since the global financial crisis, bringing the annual GDP growth to 1.4 percent in 2020 from 0.7 percent in 2019," Oxford economics added in its comments.