Singaporean economic growth bolsters in Q4, structural challenges remain

The recently released preliminary data indicated that Singaporean economic expanded at an annualized rate of 2.8 percent sequentially in the fourth quarter of this year, which is 1.2 percentage points higher than the consensus expectations. Since real GDP in the Lion City tends to be volatile on a sequential basis, focus is on the year-on-year rate, which smooths out some of the volatility. On a year-on-year basis, the real GDP growth slowed in the fourth quarter.

Base effects had a role to play in the deceleration, but as a double-digit sharp rise in real GDP growth occurred in the fourth quarter 2016. The real economic growth expanded 3.5 percent in the course of 2017, up from the 2 percent rate that was recorded in the previous year and putting the nation on track to more or less match the growth in global real GDP in 2017, noted Wells Fargo in a research report.

The GDP growth in Singapore is tightly attributed to the global economic growth as a whole, and as a result 2017 witnessed an economic turnaround in the Lion City following a couple years of especially slow growth. But structural challenges are expected to keep the Singaporean economy from returning to the sustained growth rates of almost 10 percent experienced in the past few expansions.

The quick rate of globalization and corresponding growth in global trade has downshifted, with no obvious catalyst on the horizon that would spar another period of supercharged global integration, stated Wells Fargo in a research report.

The Singaporean population is aging, a common theme throughout the developed world that has slight bearing on the quarterly GDP prints but exerts an invisible drag on trend growth behind the scenes. Moreover, high housing costs have impacted some households, especially the lower-income ones. High housing costs in land-strapped areas could be a difficult puzzle for policymakers to solve. Also, along with the other structural challenges facing the Singaporean economy, it implies that the IMF’s forecast of roughly two-and-a-half percent real GDP growth through 2022 is more or less reasonable, said Wells Fargo.

FxWirePro launches Absolute Return Managed Program. For more details, visit http://www.fxwirepro.com/invest