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Singapore Business Forecast Report Q3 2013

Singapore Business Forecast Report Q3 2013 - new country guide report published

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2014-02-19 08:37:03 - Singapore Business Forecast Report Q3 2013 - a new country guide report on

The recent uptick in external demand is unlikely to mark the beginning of a forceful recovery, and, given Singapore´s heavy dependence on trade, we are forecasting for the economy to recover only slightly in 2013 to 2.5% growth.

Singapore´s economy is in the midst of a longer-term rebalancing as the government looks to reduce the country´s reliance on foreign labour, and this will have substantial effects on inflation and economic growth over the medium term.

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 poor demand for Singapore´s particular mix of exports (especially its heavily IC-weighted electronics exports), we note that risks to our 2.5% GDP forecast for 2013 are to the downside.

Singapore inflation moderated considerably in March, posting at 3.5% year-on-year (y-o-y) versus 4 .9% in February as new loan curbs hit Certificate of Entitlement (COE) prices, effecting a dramatic fall in transportation related cost pressures. At the same time, we believe the core inflation may begin to tick up in the second half of the year as wage pressures begin to feed through into consumer prices, and have therefore upgraded our end-year inflation forecast from 2.5% to 3.0%.

We see little reason to expect a considerable export rebound before the end of 2013, and continue to believe that, while trade activity may continue to improve into Q313, any recovery is likely to be transitory. 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. Although headline inflation moderated to 3.5% in March, the economy contracted by 0.6% in Q113. With our forecast now indicating that inflation is likely to outpace real GDP growth in 2013, we note that stagflationary risks remain, particularly in view of the fact that risks to our GDP forecast are to the downside.The price of this market report covers 4 quarterly reports on this sector. This quarterly report will be downloadable instantly as a PDF document, with the 3 remaining reports delivered at regular intervals throughout the year.

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Mike King
Phone: London: +44 (0) 203 086 8600

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