World Economy

Singapore Growth Upgraded

Consumer sentiment remains weak amid rising unemployment.Consumer sentiment remains weak amid rising unemployment.

Economists have turned bullish about Singapore’s growth prospects this year, following a surge in manufacturing output during the last three months of 2016, according to a quarterly survey released on Wednesday.

The Monetary Authority of Singapore’s latest Survey of Professional Forecasters showed economists now expect gross domestic product to grow 2.3% in 2017, up from the median estimate of 1.5% in the previous survey, Nikkei reported.

However, with consumer sentiment remaining weak amid rising unemployment, private consumption is expected to edge up by just 1.1% this year, lower than the earlier projection of 1.5%.

The MAS polled 28 private-sector economists for the latest survey and received 23 responses.

Singapore’s economy grew 2% last year, beating the forecasts of most economists due to an 11.5% on-year surge in manufacturing in the fourth quarter. Manufacturing accounts for about one-fifth of Singapore’s economy, while financial services make up another 13%.

Manufacturing is expected to remain in the lead this year, growing 4.5% compared to the previous forecast of 1.1%. Finance and insurance, another key sector, is expected to grow 2%, up from the earlier prediction of 1.8%.

United Overseas Bank, which earlier this week upgraded its 2017 growth forecast for Singapore to 2.4% from 1.8%, said Asia’s economic outlook has improved, with recent exports and factory output data from the region pointing to a recovery in demand.

“Positive spill-over from trade to the non-tradeable sectors, improvement in global demand, as well as further fiscal impulse from the Singapore budget are expected to spur stronger economic growth this year,” said UOB, the smallest of the city-state’s three banking groups.

Despite the rosier forecasts, sentiment among companies in Singapore remains in the doldrums.

Ho Meng Kit, chief executive of the Singapore Business Federation, said a recent survey showed many companies continue to face slowing demand and lower profit margins.

“Most expect Singapore’s business climate to remain the same over the next 12 months, with business sentiment looking less optimistic. While there are signs indicating stabilization of China’s economy, it will take some time before Singapore businesses feel the gradual upswing in demand,” he said. China is Singapore’s biggest trading partner.

A report released earlier Wednesday by the ministry of manpower showed the average resident unemployment rate rose to 3% in 2016 from 2.8% in 2015, the highest since 2010. The overall jobless rate, which takes into account Singapore’s large foreign workforce, stood at 2.1% for 2016, up from 1.9% in 2015.

“While the near-term growth outlook for manufacturing has improved, the hiring outlook for 2017 remains cautious, as performance is likely to be uneven across clusters,” the ministry said.

According to the MAS survey, economists expect the overall unemployment rate to climb further this year, with the median estimate coming in at 2.4%. The outlook for unemployment was unchanged from the previous survey.

Despite the GDP recovery of the fourth quarter, the job market has continued to weaken and is the softest since the global financial crisis, said Citigroup economist Kit Wei Zheng. “With unemployment partly structural, improvements in external demand—even if sustained—may take longer to filter through to the job market,” Kit added.

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