Singapore's Slower than Expected Q4 Growth: There's still Room for Optimism

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Singapore's trade reliant economy expanded 1.6% quarter-on-quarter in Q4 2018, slower than the country's previous forecast, according to a statement by the Ministry of Trade and Industry.

In the same period, the city state’s manufacturing sector declined by 8.7% on a quarter-on-quarter seasonally-adjusted annualized basis, compared with 3.1% growth in the previous quarter.

On a year-on-year basis, the economy grew 2.2% in Q4, slightly slower than the median forecast of 2.3% in a Reuters survey.

From a year earlier, the economy grew 2.2%  in Q4, compared with the median forecast of 2.3% in the Reuters survey and a revised 2.3 percent growth in the third quarter.

In the entire year of 2018, the economy was up 3.3%, which was still within the government’s forecast range of 3.0-3.5%, but had slowed down from the three-year high of 3.6% in 2017.

ING’s chief economist head of research, Asia Pacific Robert Carnell believes the quarter-on-quarter growth number is a sign of positive development.

“Although it’d easy to portray Singapore's final quarter of GDP growth of 1.6% QoQ annualized as a slowdown from previous quarters, the truth is that this has been a remarkably steady year for economic growth,” he said. “Annualized figures exaggerate small differences. Whereas in fact, the range of non-annualized growth over the year has been only 0.4%QoQ, compared with more than 3% in 2017, and 2.2% in 2016.”

That steadiness reflects changes in the economy - no longer the big mid-year surge of exports to fuel global production ahead of the West's holiday season. He observed.

“This makes growth more predictable, planning easier, and investment less prone to unforeseen swings in external demand. This should be viewed as a positive development,” he noted.

The economy expanded 3.3 percent for all of 2018, slowing from a three-year high of 3.6 percent the prior year. The government's forecast for 2018 growth had been 3.0 to 3.5 percent.

2019 forecast: Room for optimism though risks tilted toward the downside
The Singaporean government has a wide range for 2019's GDP growth forecast of 1.5 to 3.5%.

ING predicts 2.6% growth for the full year of 2019, Carnell said.

While headwinds have already been evident—slowing growth in G-7 and China, there’s still room for optimism, he noted.

“Trump seems keen for some sort of deal with President Xi on trade, though it remains to be seen what sort of deal, and how quickly tariffs can be reduced or removed,” Carnell said. “In the meantime, the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) of 11 countries, including Singapore, substantially reduces tariffs and could give other trade in the region a helpful boost.”

He warned that risks are still tilt towards the downside, though not markedly so.

"We could yet have to revise our forecast numbers up, instead of down. But with the risks tilted in this way, we’d expect the MAS to proceed cautiously, just as the US Fed is also more likely to tread a cautious path during 2019.”