Singapore is one of the main financial hubs in the world but investors are experiencing a sense of gloom against the backdrop of sluggish growth. In the latest report by top analyst polled by Monetary Authority in the country (MAS) the economic prospects in the country are not looking good.
The economic analysts have again cut growth forecast for 2016 to a modest 1.9%. This is down from an earlier projection of 2.2% that had buoyed the spirits of investors and consumers alike.
The survey done in March 2016 closely compares to projections from the Trade and Industry ministry which had set growth rate at between 1-3% for 2016. According to analyst this would be the lowest growth rate since 2009 when the country had started an upward trend after the global recession.
Decent Result in the Prevailing Conditions
The survey also contained the factors that are responsible for the downward forecast including falling oil and gas prices, sliding Chinese growth and a struggling house market in the country.
"When you put all these factors into play managing a 2% annual growth in 2016 will be a major achievement," says Mr Richard Jerram the chief economist at the Bank of Singapore. There was general pessimism about the insurance sector and financial, and increase in the business loans in Singapore obtained in the past few months with the analysts projecting a 3.6% growth in the two sectors down from 5.9% in a Q4 2015 survey. The manufacturing sector also received a downgrade in the forecast and it is expected to contract by 2.7%.
One of the exceptions in the survey is the construction industry which is expected to grow by about 2.6% a significant increase from 1.2% in the December survey.
Negative Inflation a Positive Sign
The survey also whittled down their expectations for the inflation in 2018 with CPI for all items expected stand at -0.2%. This compares with the projections of an increase in the previous survey. Core inflation excluding private transport and accommodation has been cut to 0.8% down from 1% in the previous survey.
"This is the first time Singapore will witness below zero headline inflation for 2 straight years," noted Mr Irvin Seah of DBS Bank. “While the negative headline inflation of 0.5% is already a multiple year low the core inflation rate remains above zero due to factors such as rental costs,” added the economist.
The report by the analysts has prompted the view that MAS will ease its policy setting in its next announcement.