GDP growth may hit 0.5% in 2019: report

MAS expects the manufacturing and retail sectors to contract.

The Singapore economy is projected to grow 0.5% for 2019, the Bank of America Merrill Lynch (BofAML) Global Research reported. Their 2020 growth estimate is below consensus at 1.0%.

According to Merrill Lynch economist Mohammed Faiz Nagutha, although recession risks may rise again given mixed estimates from the Ministry of Trade and Industry (MTI), these tended to generally be later subjected to upward revisions.

The Monetary Authority of Singapore (MAS) expects the economy to improve “modestly” but “below potential” in 2020. Manufacturing and retail sector is expected to fare poorly, although finance & insurance, ICT, domestic-oriented services and construction may see continued expansion.

However, with the authority estimating the output gap to have only turned "slightly negative" despite a sharp fall in growth in the last few quarters, BoFAML said that this suggests potential growth to be below the 2-3% official estimates.

A separate report from Fitch Solutions notes that the economic growth is tipped to slow to 0.9% by the end of 2019 following quarters of dismal economic showing in Q2.

Based on the estimates, the economy grew 0.1% YoY and 0.6% QoQ SAAR in Q3, narrowly averting a technical recession.

In Q3, manufacturing fell 3.5% YoY, weighed by electronics and precision engineering. Growth in services improved to 0.7% QoQ but weakened to 0.9% YoY, whilst the sequential contraction in construction eased to dipping 1.1% QoQ and grew 2.7% YoY over the same period.

MAS is expecting global economic growth to slow “discernibly” in 2019 then stabilise in 2020 “barring further shocks.”

BofAML also expects MAS to further ease the rate of appreciation of $NEER to a 0% slope, in line with UOB's forecast. "Such a move will be consistent with two years of below-trend growth and below-target inflation, which could ultimately threaten medium-term price stability," Nagutha wrote.