HSBC forecasts a ho-hum 2011 for Singapore economy

The bank says the country is about to enter into “normal times” after rebounding quickly from the global financial crisis and posting a record 14.7% GDP growth for 2010.

Advance Q4 GDP estimates showed growth rising to 12.5% y-o-y (vs. 10.5% in Q3) and 6.9% q-o-q SAAR (vs. -18.9% in Q3).

In a statement, the bank said it expects the economy to grow "at a more sustainable pace" of 5.2% y-o-y due to the maturation of the global inventory re-stocking cycle and the completion of large construction projects.

It noted, however, that MAS will likely remain in tightening mode due to the inflation pressures in place.

“[Although] Singapore has had a truly remarkable recovery from the global financial crisis and has record growth numbers to prove it, we are now going to enter more ‘normal’ times,” the bank said.

For 2011, HSBC expects growth to be held up by the services sector, especially financial services (boosted by strong credit growth and the continued need to inter-mediate large capital inflows) and tourism-related businesses (benefitting from the slip-stream of activity following the opening of the two IRs).

Singapore enjoyed a record jump in GDP for 2010 due to the gains made by the manufacturing sector as pharmaceutical production came back on-stream after scheduled shutdowns in Q3.

The manufacturing sector was up 28.2% y-o-y (vs. 13.8% in Q3) and 20% q-o-q SAAR (vs. a drop of 53.4% in Q3).

The construction sector, meanwhile, contracted by 1.2% y-o-y (vs. 7.1% in Q3) and 18.5% q-o-q SAAR (vs. -10.4% in Q3) as the pipeline of major projects continued to thin out.

The service sector activity held up relative well, with annual growth ticking in at 8.8% y-o-y (vs. 10% in Q3) and sequential growth came in higher at 4.7% q-o-q SAAR (vs. 0.6% in Q2).

Growth in the sector was driven by financial services (ACUs, commercial banking, and FX trading) and tourism-related businesses benefitting from the hoards of tourists streaming in.

HSBC said the uptick in growth in Q4 was expected and to a large extent reflected a technical windfall after Q3's sharp contraction driven by the vagaries of pharmaceutical production cycle.

It added, however, that the dip in construction activity cannot fully be blamed on the property cooling measures the government is implementing.

“Although [the dip] can largely be traced to the finalization of large-scale projects and it is too early to associate this trend with the government's August property tightening measures,” the bank said.