Singapore's GDP growth predicted to soar to 4.4% in 2014

Here's why it's bad news.

According to Standard Chartered, based on advance estimates, Q4 GDP grew 4.4% y/y, down slightly from 5.9% in Q3. The performance was slightly weaker than expected.

On a q/q seasonally adjusted annualised rate (SAAR) basis, the economy contracted 2.7%.

Here's more from Standard Chartered:

We are not overly concerned about the contraction, given the consecutive expansion in the past four quarters, although it does suggest that current growth momentum is moderate.

We expect Singapore’s GDP growth to accelerate to 4.4% in 2014, supported by net external demand. This is slightly higher than the government’s forecast of 2-4%.

Global PMIs have remained positive, hinting at stronger industrial production globally and more demand for Singapore’s exports (see Figure 3). Externally-oriented sectors are likely to benefit as the US and Europe recover and move towards trend growth.

We think that GDP growth in the US will accelerate to 2.4% in 2014 from 1.7% in 2013, while growth in Europe rebounds to a positive 1.3%, from a 0.4% contraction in 2013. Stronger domestic demand from rising confidence and household incomes in the US and Europe are likely to boost demand for Singapore’s exports. At the same time, China’s GDP growth will likely remain resilient, supported by domestic consumption and export growth.

Overall, we think that a stronger performance in externally-oriented sectors will more than make up for the likely consolidation in domestic sectors due to the tight labour situation and a cooling property market

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