S'pore economy likely to have "below potential" growth in 2013: MAS

S'pore economy likely to have "below potential" growth in 2013: MAS
By Linette Lim | Posted: 30 October 2012 2129 hrs
 
SINGAPORE: Singapore's economy may likely see another year of "below potential" growth in 2013, according to the Monetary Authority of Singapore (MAS) in its half-yearly macroeconomic review.

MAS said the economy is under pressure from two fronts -- weak export demand globally, and rising business costs due to domestic restructuring.

Large scale public projects such as the construction of the Downtown Line and new Build-To-Order flats have helped cushion Singapore from the global downturn.

Such domestic-oriented activities contributed to almost 70 per cent of economic growth in the first half of the year, even though it only accounts for a third of Singapore's GDP.

Still, that is not enough to fully offset the slowdown in the trade-related activities, the IT cluster, and regionally-exposed services.

Saktiandi Supaat, head of FX Research (Global Markets) at Maybank, said: "Growth is about one to three per cent next year for Singapore. Potential growth, as you know, MAS has always highlighted that it is about three to five per cent, and still maintains that three to five per cent potential growth.

"So there may be some upside to that one to three per cent if things work out in the second half."

For this year, the central bank is sticking to its projection that Singapore will grow 1.5 per cent to 2.5 per cent.

The cyclical downturn in the world economy -- especially in advanced nations -- is affecting Singapore at a time when it is undergoing domestic restructuring.

Jimmy Koh, head of Economics (Treasury Research) at UOB, said: "Liquidity has pushed up asset prices, pushed up CPI and is likely to remain so. At the same time you're trying to restructure your economy to enhance productivity and some sort of wage increase is being seen, (as we are) cutting down our reliance on foreign workers. So you have a lot of moving parts all coming at the same time."

MAS said that "it is important for medium-term restructuring in the domestic economy to proceed even as Singapore faces short-term cyclical headwinds."

Domestic restructuring, which saw the tightening of foreign worker policies, has boosted demand for local workers in the low- and mid-skilled segments, especially in domestic industries like construction and services.

MAS said unit labour costs could rise by as much as three to four per cent in 2013, following the four to five per cent increase this year -- which in turn could be passed on to consumers.

As a result, the sequential increase in core prices, while unlikely to reach the highs in early 2012, is expected to pick up, driving core inflation which excludes accommodation and private road transport, to the range of two to three per cent in 2013, from 2.5 per cent this year.

At the same time, CPI-All Items inflation is expected to ease from slightly above 4.5 per cent to the 3.5 to 4.5 per cent range next year.

-CNA/ac



- wong chee tat :)