Buildings stand illuminated at night in the central business district of Singapore. (Photographer: Sanjit Das/Bloomberg)

Singapore's Export-Reliant Economy Ends 2018 on Slower Note

(Bloomberg) -- Singapore’s economic growth slowed and home prices fell toward the end of last year as global trade tensions and rising interest rates took their toll on the export-reliant city state.

Gross domestic product rose an annualized 1.6 percent in the three months through December from the third quarter, easing from a revised 3.5 percent gain previously, according to an advance estimate from the Ministry of Trade and Industry Wednesday. The median forecast in a Bloomberg News survey of economists was for a 3.6 percent expansion.

Singapore's Export-Reliant Economy Ends 2018 on Slower Note

Key Insights

  • As one of Asia’s most export-reliant nations, Singapore’s economic outlook is closely tied to global trade and growth. Authorities have indicated the economy could cool even further in 2019, projecting a range of 1.5 percent to 3.5 percent for GDP growth, after it expanded 3.3 percent in 2018
  • The Monetary Authority of Singapore, the nation’s central bank, tightened policy twice in 2018 amid a global withdrawal of stimulus led by the Federal Reserve. Key to the MAS’s policy this year is whether the Fed pauses its rate-hike cycle earlier than expected and the outlook for Singapore’s core inflation, said Selena Ling, an economist at Oversea-Chinese Banking Corp.
  • House prices posted their first decline in six quarters as the government’s cooling measures imposed in July started to bite, according to a separate report on Wednesday

Economists’ Views

  • Manufacturing, which contracted an annualized 8.7 percent in the fourth quarter “appears to have been the main culprit here,” said Vishnu Varathan, head of economics and strategy in Singapore for Mizuho Bank. “The broader question on 2019 is the most pertinent one here -- and the elephant in the room after China’s PMI manufacturing slumped to three-year lows.”
  • “There could be one more tightening, but uncertainty over whether April or October" in terms of timing, said OCBC’s Ling. “For now the slowdown has been largely in line with their expectations, and the growth trajectory for 2019 is for a further deceleration -- so nothing out of the blue here. The key really remains core inflation.”

What Our Economists Say...

Barring a U.S.-China trade deal, growth has scope to weaken much further in 2019. This, and softer oil prices, may keep monetary policy unchanged in April, if not for all of 2019. The Monetary Authority of Singapore tightened policy at both of its meetings last year, in April and October. This kept the central bank ahead of the curve on inflation. The core gauge already appears to have peaked.

-- Tamara Henderson, Bloomberg Economics

Get More

  • GDP rose 2.2 percent in the fourth quarter from a year earlier, the slowest pace all year
  • For a more a detailed breakdown of how sectors performed, see this table: Singapore Fourth Quarter GDP Advance Estimates (Table). Construction saw weakness in public sector building activities, while services growth was mainly supported by the finance and insurance, business services and information and communications sectors
  • The advance GDP estimates are computed largely from data in the first two months of the quarter, and are usually revised once the full quarter’s data are available
  • The Singapore dollar was little changed after the data. For potential market reaction: Watch These Singapore Stocks After Fourth-Quarter GDP Miss; Singapore Real Estate Stocks May Move as Residential Prices Fall; Rallying Singapore Dollar Can Shrug Off GDP Miss

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