Singapore’s economic growth likely to moderate in H2 2018, MAS to continue policy normalization

In the first half of this year, the Singaporean economy has grown 4.2 percent. Nevertheless, the economic growth is likely to ease in the second half of the year, owing to the less favourable base effects, noted ANZ in a research report. Exports are expected to decelerate in the midst of increased trade tensions, while property sector is now expected to give a smaller than initially anticipated boost because of the latest easing measures from the government.

“As a result, we are downgrading our 2018 full year GDP growth forecast to 3.5 percent from 4.0 percent previously. However, we maintain our 2019 forecast at 3.0 percent”, stated ANZ.

Even if CPI-All Items inflation has remained moderate, the MAS Core Inflation has increased to a near four-year high of 1.9 percent year-on-year in August. Some modest price pressures are expected from a rebounding labor market, while core inflation is likely to average 1.8 percent this year and 2 percent next year.

Although the ongoing U.S.-China trade tensions pose downside risks to the external growth outlook, the Singaporean economy is likely to expand at a moderate rate with core inflation heading a bit above its long-term average towards the year end.

“Therefore, we expect the Monetary Authority of Singapore (MAS) to continue its policy normalisation with another slight increase in the slope of the S$NEER policy band at the October Monetary Policy Statement to ensure medium-term price stability. This will support the Singdollar, which we see appreciating to 1.33 against the US dollar by the end of the year”, added ANZ.