27th October 2017 - The Republic’s economic growth is expected to remain firm next year, although expansion “could moderate from this year”, the Monetary Authority of Singapore (MAS) said in its latest macroeconomic review released today.

Singapore’s gross domestic product is expected to come in at the upper half of the 2 to 3 per cent forecast range this year, MAS said. For 2018, it expects the economy to expand at a steady, but slightly reduced pace, amid sound global growth and a broadening recovery across domestic industries.

In the biannual report, which contains the central bank’s analysis of Singapore’s economic performance and outlook, MAS also said it expects current uneven sectoral growth to “dissipate in 2018”, with expansion in the trade-related cluster moderating and average performers improving.

Over the past two quarters, recovery in the domestic economy has picked up in both pace and breadth, MAS noted.

Gross domestic product (GDP) grew an average of 4.4 per cent on a quarter-on-quarter seasonally adjusted basis in the second and third quarters – a turnaround from the contraction over the first three months of 2017.

This was largely because of the trade-related sectors, which – underpinned by a rebound in manufacturing – have staged a significant turnaround since the fourth quarter of last year.

At the same time, while growth in the earlier quarters was largely confined to IT-related segments, most of the other industries have begun to show signs of pick-up, MAS said.

Within the modern services and domestic-oriented clusters, industry segments such as financial services, retail as well as information and communications, have improved over the last six months, signalling a broadening of economic recovery.

The central bank noted that this convergence in sectoral performance is likely to continue, resulting in a “smaller degree of growth dispersion across sectors” in 2018.

“Sectoral outcomes have been relatively uneven in 2017 as a whole, with strong performers in the IT-related industries helping to shore up weakness in construction and oil-related activities. This divergence is expected to narrow going forward,” the report said.



For one, growth momentum in IT-related segments is expected to moderate as the maturing of the global tech cycle could result in some consolidation in the growth of manufacturing production.

However, a “broad swathe of average-performing industries” will likely fare better in the quarters ahead even as growth may remain modest, MAS said.

Industry segments, such as financial services and retail, should stand to benefit from the improvement in the overall business climate, as well as firmer regional trade and growth, it added.

MAS expects the marine and offshore engineering sector to “exert less of a drag on growth” in 2018. While structural trends, such as the rise of US shale production, will cap upsides in the oil industry, supple-demand imbalances are slowly being resolved in favour of a more neutral outlook for manufacturers in this sector, it said.

Meanwhile, the construction sector could see a turnaround in 2018, albeit modestly, on the back of support from the S$1.4 billion worth of public sector contracts brought forward and stream of progress payments from earlier rail-related contracts awarded in 2016.

Earlier this month, the central bank, in line with expectations, maintained its current neutral appreciation stance for the Singapore dollar nominal effective exchange rate (S$NEER).

Core inflation – a major policy consideration for the MAS – is projected to come in at about 1.5 per cent in 2017, and average 1 to 2 per cent next year, it said.

“While the economy has emerged from the disinflationary zone of the past two years, there is as yet little evidence that underlying price pressures will accelerate in the near term. External sources of inflation are expected to be relatively benign, while effective cost pressures in the domestic economy should be restrained.”

Meanwhile, Singapore’s headline inflation is expected to be about 0.5 per cent in 2017 and remain within the range of 0 to 1 per cent in 2018, MAS said.