2012-12-14 14:50:12 - Singapore Business Forecast Report Q1 2013 - a new country guide report on companiesandmarkets.com
We do not expect to see a marked recovery in export demand until at least mid-H113, and given the ongoing external malaise and the economy´s slower than expected growth in Q312, we are now forecasting for the economy to grow by just 1.9% in 2012. Although we continue to forecast for the economy to see a rebound to 3.6% in 2013, we note that downside risks to this forecast are growing.
2012-2013 appears to be an inflection point for Singapore´s economy as it shifts away from the export-led growth that it experienced over the past decade. Although we expect the city-state to see a slight revival in its export fortunes in 2013 in line with a moderate growth rebound in Asia,
we see import growth outrunning exports for the second straight year, marking the beginning of a longer-term trend.
Key Forecast Changes
Although Singapore´s economy has thus far avoided a technical recession, it is not yet out of the woods, with the threat of stagflation once again on the radar. As a result of slower than expected growth due to increasingly feeble external demand, we have downgraded our full-year 2012 GDP growth forecast to 1.9% from 2.6%, and we note that downside risks to our 2013 forecast for 3.6% GDP growth have increased.
Singapore inflation broke with its recent trend of moderation in September, posting at 4.7% year-on-year (y-o-y) versus 3.9% in September on stubborn housing and transportation costs. While we retain our end-2012 inflation target of 3.7%, we have upgraded our end-2013 inflation forecast from 1.5% to 2.5% on expectations that ongoing supply limitations in the aforementioned categories will keep prices elevated for a more extended period Looking ahead, we see little reason to expect a considerable export re bound before the end of 2012, and have downgraded our 2012 current account surplus forecast to SGD52.7bn (15.1% of GDP) from SGD67.7bn previously. Nevertheless, Singapore´s external position remains one of the most sound in the world.
Key Risks To Outlook
Despite their continued health, a longer than expected downturn in global economic activity, or an acute financial or economic crisis stemming from either the eurozone or the US´ potential fiscal cliff could erode the remaining strength in both the labour and asset markets in Singapore. In such a case, the very low unemployment rate of 1.9% could rise towards 2.5%, and private property prices could see a sharp correction.
With inflation stubbornly remaining above its long-term average, Singapore is once again in stagflationary territory. Headline inflation hit 4.7% in September, up considerably from 3.9% in August as the aforementioned housing and transportation categories continued to pressure prices upwards. Although our forecasts do not indicate that inflation will outpace growth in 2013, we do believe that risks of this phenomenon are growing.
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