World Economy

Singapore Economy on Track

Singapore Economy on TrackSingapore Economy on Track

The republic’s economy “remains on track to post moderate growth of 2 to 4 percent” this year, according to the Monetary Authority of Singapore (MAS).

In its half-yearly macroeconomic review released on Tuesday, MAS said that while Singapore’s broad macroeconomic growth is expected to be positive, “the extent to which Singapore will benefit from the cyclical uplift will depend on developments in specific markets and industries”, Channel NewsAsia reported.

MAS said the recovery in G3 economies will be offset by a slowdown in China. “Likewise, the global IT industry is expected to benefit from firmer demand in the developed economies in 2015 but ongoing consolidation in the industry may have spillover effects on the domestic electronics sector as firms restructure and rationalize their global operations,” said MAS.

“Some strengthening of global oil prices in the latter half of the year could provide support to the oil-related manufacturing segments, which saw a pullback following the collapse in oil prices late last year,” added MAS.

“Nevertheless, there will be lingering weakness in segments such as transport engineering, due to the downshift in oil exploration activities.”

Meanwhile, MAS said domestic-oriented industries will be supported by firm demand and a temporary respite from the deferment in foreign worker levy hikes. Thus, the domestic economy should record moderate gains for the rest of this year.

 Oil Price Impact

Inflation has continued to ease in recent months, in line with expectations, said MAS. This mostly reflects the impact of lower global oil prices and enhanced medical subsidies, it added.

The monetary authority said core inflation moderated to 1.1 percent year-on-year in Q1 2015, from 1.6 percent in Q4 2014. Meanwhile, CPI-All Items inflation, or headline inflation, was further dampened by lower housing rentals, coming in at -0.3 percent in Q1 2015, compared to zero percent in Q4 2014.

MAS Core Inflation and CPI-All Items inflation is expected to ease further in Q2 to Q3 2015, as the drop in global oil prices filters through more significantly to domestic prices. For 2015, MAS Core Inflation is expected to average 0.5 to 1.5 percent in 2015, compared to 1.9 percent in 2014, while CPI All-Items Inflation could fall to -0.5 to 0.5 percent this year, compared to 1 percent previously.

Singapore’s labor market is expected to be tight in 2015 as “firm manpower demand, especially in the domestic-oriented services sectors, runs up against increasingly binding labor supply constraints,” said MAS.

It also said workers have benefitted more from economic growth. In 2014, the wage bill accounted for 86 percent of GDP growth, with the wage share at 43 percent of nominal GDP, the highest in the last decade.