Singapore economy likely to stay listless over next 18 months, Latest Business News - The New Paper

Singapore economy likely to stay listless over next 18 months

This article is more than 12 months old

Salaries expected to grow slower, but economists see light at end of tunnel

Economic activity in Singapore is likely to stay lacklustre over the next 18 months, and wages are expected to grow slower this year and the next.

The trade-related cluster faces "significant uncertainties" as well, with industries in the electronics space seeing higher volatility in recent months. Regional trade flows and supply chains are also being reconfigured, adding to the uncertainty, said the Monetary Authority of Singapore (MAS) in its biannual macroeconomic review yesterday.

Economists, however, see some light at the end of the tunnel.

Ms Selena Ling, head of treasury research and strategy at OCBC Bank, said slow growth is expected to persist into next year, with the biggest risks remaining the US-China trade, tech and currency tensions, China's slowdown and dampened demand.

But the Republic is likely to escape a technical recession - two consecutive quarters of quarterly decline - and full-year recession if global growth stabilises next year.

She said a full-year recession this year is "highly unlikely", unless there is a very sharp drop in fourth-quarter growth.

DBS senior economist Irvin Seah said high-frequency data suggests that an uptick is on its way. For example, global semiconductor shipments, in absolute dollar value, are rising month on month, he said.

"I would dare say that the worst of the current growth cycle is already behind us," he added. But tepid growth is likely to persist into mid-2020, with the lack of a "forceful positive catalyst".

For now, the MAS expects that heightened uncertainty will keep the global economy weak, with firms delaying investment plans.

Already, growth here has slowed to 0.1 per cent from a year ago in the second and third quarters.

Full-year growth is expected to be around the midpoint of the forecast range of 0 per cent to 1 per cent, before improving modestly next year.

The softening labour market is expected to reduce the pace of wage growth this year and next, said MAS.

Hiring sentiment has also turned cautious, with fewer vacancies than unemployed persons.

The trade-related cluster is likely to continue trimming headcount as well, particularly in the electronics and precision engineering industries within manufacturing, as well as in wholesale trade, MAS added.

The decline in headcount in the first half of this year has also been concentrated in electronics manufacturing and wholesale trade, said MAS.