MAS survey of forecasters: Protectionism most-cited risk to Singapore economy

A Singapore 10-dollar note Photo by Leslie Shaffer

More of the economists monitoring the Singapore economy are pointing to trade protectionism as downside risk, even as they largely kept their growth forecasts unchanged, according to the Monetary Authority of Singapore’s September survey of professional forecasters.

“Trade protectionism continues to weigh on the minds of 89 percent of respondents, with further escalation of trade rhetoric by the U.S. and its trading partners, as well as implementation of announced tariffs causing concern,” the MAS said in the statement released around midday on Wednesday. That was up from 84 percent in the June survey.

The September survey was sent out on 13 August to 27 economists and analysts, with 23 respondents, it said.

More economists also pointed to slower growth in China, amid tighter credit conditions as a risk, with 37 percent citing it, up from 21 percent in the previous survey, it said.

Faster-than-expected interest rate hikes in the U.S. was also cited as a downside risk, but the proportion fell to 37 percent of respondents, from 47 percent in the June survey, it said.

“In line with this, tightening liquidity conditions in emerging markets have prompted an increasing number of respondents to flag risks of weaker external growth,” the MAS survey statement said.

The economists responding to the survey expected third quarter gross domestic product would grow 2.1 percent on-year. In the second quarter, Singapore’s economy grew 3.9 percent on-year, similar to the median forecast from the June survey, the statement said.

For the full year, the respondents forecast gross domestic product (GDP) growth of 3.2 percent on-year in Singapore, unchanged from the June survey, although in the September survey, the median forecast was for the construction segment to contract 4.2 percent, compared with a forecast of a 2.1 percent contraction in the June survey, it said.

The median forecast was for manufacturing to grow 7.6 percent on-year in 2018 in the September survey, up from 5.3 percent growth in the June survey, it said. Accommodation and food services was also now forecast to grow 2.9 percent for the year, up from 2.2 percent growth forecast in the June survey, it found.

For 2019, GDP growth was expected to slow to 2.7 percent, with the most likely range forecast at 2.5 percent to 2.9 percent, unchanged from the June survey, the MAS survey said.

The respondents also pointed to some potential upside risks to their forecasts, it said, in particular better-than-expected performance of the U.S. economy, which was cited by 47 percent of the respondents, up from 32 percent in the June survey.

“In contrast, the respondents pointed to outlook of the domestic property market as becoming less optimistic, due in part to the recent implementation of macroprudential cooling measures,” it said. “Notably, 37 percent of the respondents cited the dissipation of trade tensions as a possible upside, as it would remove uncertainty from the forecast horizon.” There was no corresponding figure from the June survey.

The respondents forecast the U.S. dollar would be fetching a median S$1.377 at the end of the third quarter, with a range of S$1.32 to S$1.39 forecast, it said. At the end of 2018, they forecast the dollar/Sing at a median 1.37, compared with 1.32 in the June survey, with a range of 1.31 to 1.40 forecast, it said.

The dollar/Sing was at 1.3759 around the time of the release of the MAS survey.

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