Singapore's slow economic growth environment expected to continue: MAS
While the US is still expected to grow at a modest pace, Singapore may not be able to fully capitalise on it as most of US growth will be driven by domestic spending, said MAS.

By Patrick John Lim
Posted 27 Apr 2016 12:00 Updated 27 Apr 2016 15:04

SINGAPORE: The slow growth environment is expected to continue for Singapore's economy as cyclical factors put a dampener on economic growth, the Monetary Authority of Singapore (MAS) said in its biannual macroeconomic review on Wednesday (Apr 27).

The review contains MAS' analysis of macroeconomic developments affecting Singapore's economy.

Given a more modest pace of growth expected for Singapore's economy and core inflation, MAS moved to a neutral stance for its monetary policy, setting the rate of appreciation for the Singapore $NEER (nominal effective exchange rate) to zero.

In its review, MAS noted that softening growth among Singapore's key trading partners would affect externally-oriented industries. In particular, growth in capital formation is expected to be lower from the G3 economies which would affect trade-related sectors such as precision engineering.

The report also noted that US growth slackened towards the end of last year on the back of a moderation in personal consumption and weaker exports. While the US is still expected to grow at a modest pace, Singapore may not be able to fully capitalise on it as most of US growth will be driven by domestic spending.

Meanwhile, India could be a bright spot amid the tepid growth outlook, driven by private consumption and public infrastructure spending.

On the national scene, while domestic-facing sectors are expected to generally be more resilient, the central bank observed economic activity weakening among corporates, which saw more firms undertake consolidation activities last year. This included slower business loans growth and an uptick in redundancies.

However, it added that the corporate adjustments appear to be less severe compared to past periods of outright recession, and seems to be confined to specific pockets of industries.

Looking ahead, MAS said the long-term prospects for regional services trade still look bright, as the ongoing rebalancing of China towards a more consumption-based economy is expected to fuel demand for imported services. In its review, MAS highlighted opportunities for service firms in the areas of transport and communications as well as healthcare and medical.

- CNA/ek


- wong chee tat :)