S'pore will grow between 1.5% and 2.5% this year: MAS

S'pore will grow between 1.5% and 2.5% this year: MAS
Posted: 30 October 2012 1241 hrs
     
SINGAPORE: Singapore is likely to see lacklustre economic growth and elevated inflation for the second consecutive year in 2013, said the Monetary Authority of Singapore (MAS).

Gross domestic product (GDP) growth "is likely to be positive though below-trend next year", the central bank said in its half-yearly macroeconomic review, adding that weakness in Europe and the slowdown in China will weigh on external-oriented sectors such as manufacturing.

As a result, MAS sees growth in the advanced economies subdued "for a protracted period as painful deleveraging continues", even as a muted recovery is envisaged for Asia ex-Japan.

But domestic-oriented sectors are set to remain resilient. This will provide support to Singapore's labour market, which should remain at close to full employment next year.

For 2012, the central bank is sticking to its projection that Singapore will grow between 1.5 and 2.5 per cent, down from 4.9 per cent last year and below the economy's growth trend of 3 to 5 per cent.

Singapore continues to face a short-term cyclical downturn in the macro economy as domestic restructuring policies are implemented, said the MAS.

In particular, trade-related activities, the IT cluster, and regionally exposed services have been most badly affected by the cyclical downturn.

On a bright note, domestic-oriented activities have been a key pillar of support, contributing almost 70 per cent of the growth in the first half of 2012 despite accounting for only a third of Singapore's GDP.

MAS also 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, boosted demand for resident workers in the low- and mid-skilled segments, especially in domestic industries like construction and services.

This pushed up wages and added pressure to domestic costs, said MAS. It added that unit labour costs could rise by as much as 3 to 4 per cent in 2013, following the 4 to 5 per cent increase this year.

Higher business costs could be absorbed by firms through lower profit margins in the short term, but there may be some pass through to consumers.

MAS said that this sequential increase in core prices "while unlikely to reach the high in early 2012, is expected to pick up".

Core inflation, which excludes accommodation and private road transport, will likely stay above its long-term average at 2.5 per cent this year, and 2 to 3 per cent in 2013.

CPI-all items inflation is likely to slightly exceed the government's forecast of 4.0 to 4.5 per cent this year, and ease to the 3.5 to 4.5 per cent range next year.

- CNA/al


- wong chee tat :)