Based on the results from a quarterly poll released on Wednesday (11 March), the full-year forecast for Singapore’s growth was more than halved by private-sector watchers in February.
After the revision, Singapore’s gross domestic product (GDP) is now estimated to grow by just 0.6 per cent this year, which is lower than the more promising 1.5 per cent estimated by the past survey in December 2019.
According to the survey responded to by professional forecasters conducted by the Monetary Authority of Singapore (MAS), the likelihood of an economic slowdown is almost 30 per cent. The chances of a negative showing had been set at only two per cent in December last year.
The survey was responded to by 21 economic analysts on 18 February, a day after Ministry of Trade and Industry and MAS both downgraded their official growth forecast to a range between -0.5 per cent and 1.5 per cent to highlight the risk of recession.
The gloomier outlook captured in the survey is coupled with expectations of weaker economic performance overall, such as in accommodation and food services, wholesale and retail trade, and manufacturing sectors which will possibly contract in 2020, counter to earlier predictions of growth.
Private consumption is now estimated to grow at a slower rate than the earlier 2.7 per cent forecast, at 1.9 per cent this year. As for non-oil domestic export growth, it is predicted to sink from 1.6 per cent to 0.2 per cent based on the downgrade by Enterprise Singapore (ESG).
The outlook for inflation has also been downgraded by economists for core inflation and all-items inflation metrics adopted by MAS in conducting monetary policy. On the other hand, unemployment rate forecast rose to 2.4 per cent, which is higher than the 2.3 per cent forecast last December.
According to the report by MAS, 70 per cent of respondents cited global financial easing as an upside driver as “more accommodative global financial conditions emerged as the most-cited factor that could drive an improvement in financial market and lending conditions”.
A depreciation of the Singapore dollar’s nominal effective exchange rate (NEE) could stimulate growth, according to about 40 per cent of respondents.
The MAS will convene in April for its half-yearly monetary policy review. Kit Wei Zheng and Ang Kai Wei, two analysts of Citi, stated in a report on Tuesday (10 March) that MAS will likely shift the appreciation pace of Singapore dollar to a “zero-slope” neutral stance. However, they also suggest to postpone the lowering of the mid-point of the policy band in which the currency can be traded.
“A flat slope would re-align the NEER to transitory shock in GDP levels and the output gap implied by the downgraded official forecast…We note MAS’s preference for calibrated, unhurried moves, which provides a ‘steady hand’ against more aggressive easing elsewhere, and argues against both inter-meeting easing and downward re-centring in April,” the two Citi analysts opined.
However, the survey, which does not represent the views or forecasts of MAS, was released in February. Global events could have changed for the worse since the survey.
In the midst of Covid-19 outbreak which originated in China, MTI and MAS downgraded their growth forecast. The virus has reached to more than 100 places across the globe.
ESG also highlighted the risk of lower oil prices on the country’s 2020 trade performance last month, which was followed by a price war between oil producers Saudi Arabia and Russia.