Singapore economy poised to grow 5.8% in 1Q

See which sector will pick up the slack.

According to DBS, GDP growth in 1Q14 should remain on a healthy clip. The advance GDP estimates to be announced Monday morning is likely to post a reading of 5.8% YoY.

This is up from 5.5% registered in the previous quarter but come partly against the low base in the same period last year. On a sequential basis, growth impetus will report a fairly healthy 2.5% QoQ saar, albeit slower than the 6.1% pace in 4Q13.

Here's more:

Essentially, while growth momentum within the manufacturing sector will likely moderate, the services sector is expected to pick up the slack.

The average industrial production growth in Jan-Feb14 has recorded a robust 8.6% YoY increase. But a possible contraction in Mar14 will likely lower the quarterly average, to slightly below the 7.0% pace posted in the previous quarter.

While PMIs of key export markets have generally remained in expansion mode in recent months, the levels have eased marginally, suggesting a recalibration in production activities. Specifically, it reflects manufacturers winding down on their earlier restocking exercise than the mere decline in global demand.

The services sector is expected to do the heavy lifting. Headline growth in this sector is expected to come in slightly below 7%, from about 6% in the previous quarter.

Trade related services, tourism and financial services are expected to do well against the backdrop of an improving global economic outlook. However, the domestic manpower crunch and high business costs are set to erode its performance in the coming months.

The Monetary Authority of Singapore (MAS) will convene its policy review on the same day as well. The MAS is expected to continue its exchange rate policy stance of a gradual appreciation of the Sing NEER. Possible spike up in inflation due to wage pressure as well as a fairly healthy pace of economic growth essentially call for a continued tightening bias in the monetary policy.

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