Brokers' take: Downside risks to Singapore's economic growth piling up
SINGAPORE'S Ministry of Trade and Industry (MTI) announced on Tuesday that the Singapore economy grew by 1.8 per cent on a year-on-year basis in the second quarter, slower than the 2.8 per cent growth in the previous quarter.
Here are some comments:
DBS Group Research:
"In line with our expectation, upward revision in the services sector has helped to offset the slump in the manufacturing sector."
"Manufacturing sector has indeed been the weakest link. Overall manufacturing growth in the second quarter now reads -4.9 per cent year-on-year against the advance estimate of -4.0 per cent.''
"Beyond the rising external headwinds and global uncertainties, Singapore manufacturers are also struggling with the double whammy of higher business costs and domestic labour crunch."
"For example, electronics exports in Singapore have been stuck in the doldrums for the past three years. This has allowed emerging electronics manufacturers such as Vietnam to catch up. In fact, Vietnam will overtake Singapore to become the fifth largest electronics exporter in Asia within the next two years. Unless Singapore can find "greener pastures" in manufacturing, otherwise, this sector could be in for a steady structural decline."
"External headwinds have remained strong. Absent a recovery in the global economy, manufacturing performance will continue to languish while the services sector struggles with the domestic labour constraints. Full year GDP growth for 2015 is expected to register 2.4 per cent. But downside risks are certainly piling up. Against the backdrop of the second quarter GDP contraction, risk of a technical recession, albeit still low, should not be discounted.
Credit Suisse:
"Fiscal policy holds the key to growth improvement in H2. Partly due to the weak Q2 GDP print, we see downside risks to our full year 2015 GDP estimate of 3.2 per cent (consensus: 2.6 per cent).''
"Today's GDP print is unlikely, in and of itself, to move the needle on the central bank's exchange rate policy yet. As we have been highlighting, the biggest risk to policy comes from stability in the labour market, in our view...This is important too in light of General elections likely to be called sometime later this year.''
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