“Over the last six months, the global economy has picked up and should continue to support Singapore’s trade-related sectors. However, activity across the broader domestic economy is likely to be uneven, and overall GDP growth in 2017 will remain modest,” noted Monetary Authority of Singapore (MAS) while releasing half-yearly macroeconomic review on Thursday.
The central bank also predicted that Singapore’ GDP was expected to come in at about 1 to 3 per cent in this year.
The review also found that the outlook for Singapore’s trade partners was looking up. For instance, stronger labour numbers from the US suggested consumption growth remained supported, said MAS.
Growth in Asia was also projected to expand by 4.8 per cent in 2017, with external demand re-emerging as a growth driver for the region.
“The faster pace of global economic activity should benefit trade-related sectors and will support overall GDP growth in 2017. The turnaround in the global IT cycle will continue to benefit the domestic semiconductor and precision engineering industries,” observed MAS in its report.
However, recovery in the rest of the manufacturing sector, however, is expected to remain ‘patchy’ in the near term, said the central bank.
While speaking about the service sector, MAS noted, “The modern services cluster is expected to expand at a slightly faster pace in 2017, led by a pickup in the financial sector and firm demand for ICT services. While healthcare and education services will be underpinned by resilient demand, spending on discretionary retail items and other services is expected to be dampened by the still-subdued labour market and weak consumer sentiment.”
It also predicted, “Retail and food services will face cyclical and structural challenges amid a soft labour market, subdued consumer confidence and greater competitive pressures.”
For the year as a whole, average prices are expected to be higher than 2016. Singapore's inflation as measured by the consumer price index (CPI) is forecast to come in at 0.5 to 1.5 per cent, while core inflation, which excludes the cost of accommodation and private road transport, is projected to be 1 to 2 per cent.
“Energy-related items will be the main driver of the projected rise in the CPI. Other domestic business costs are also likely to rise modestly this year, partly due to administrative price increases such as the hike in water prices,” MAS said.