Economists cut Singapore growth forecasts

By Kevin Lim

SINGAPORE, Dec 12 (Reuters) - Economists have cut their

economic forecasts and raised their inflation outlook for

Singapore, a central bank survey released on Wednesday showed,

in a further sign that the city-state is likely to face another

year of sub-par growth and elevated inflation in 2013.

Economists now expect the Southeast Asian city-state's gross

domestic product to grow by 1.5 percent this year, down almost a

full percentage point from the median estimate of 2.4 percent in

the previous poll, according to the Monetary Authority of

Singapore's (MAS) latest quarterly Survey of Professional

Forecasters.

For 2013, the Singapore economy is now seen growing by just

2.7 percent, down from 3.9 percent in the previous survey but in

line with the government's latest forecast for an expansion of

1-3 percent next year.

Singapore, whose trade is three times GDP, has been hurt by

the downturn in Western economies that has crimped demand for

its exports. The wealthy city-state of 5.3 million people has

also underperformed neighbouring countries such as Malaysia and

Indonesia, which can rely on their much larger populations to

prop up growth.

Singapore's inflation for 2012 will likely come in at 4.7

percent this year before slowing to 3.8 percent next year, the

latest survey showed, with the latest estimates coming well

above the September survey's median forecasts.

While rising rents and soaring car prices have been the main

contributors to inflation in Singapore over the past two years,

government measures to make it harder for firms to employ

low-cost foreign workers have also contributed by pushing up the

prices of services such as healthcare.

Inflation had averaged around 2 percent prior to this

period.

Most economists expect Singapore will face several years of

slow growth and relatively high inflation as the government

reins in immigration amid a backlash from locals unhappy about

crowded trains and competition for jobs that has depressed wages

at the lower end.

To help keep inflation in check, MAS is likely to persist

with its policy of letting the Singapore dollar rise against the

currencies of its main trading partners.

According to the MAS survey, the Singapore dollar is

likely to end the year at 1.225 to the greenback before

strengthening further to 1.200 by end-2013.

The Singapore currency, which is currently trading around

1.2210, has gained 6.2 percent so far this year, the third best

performer among Asian currencies tracked by Thomson Reuters.

"The government has made it very clear that previous high

growth rates boosted by the surge in foreign population is

pretty much unsustainable," Mark Tan, a senior economist at

Goldman Sachs in Singapore, said at a briefing on Tuesday.

"The new way going forward really is to boost domestic

productivity and the government has said we are in a period of

lower growth as the economy transitions. In that transition

phrase, you are going to deal with higher wage cost, high

inflation and slower growth," he added.

Singapore's economy grew by 4.9 percent in 2011 following a

blistering 14.8 percent expansion in 2010.

2012 Current September

(year-on-year percentage survey survey

change except for exchange

rate)

GDP 1.5 2.4

- manufacturing 1.1 2.7

- financial services -0.5 1.1

non-oil domestic exports 1.6 4.2

CPI (all items) 4.7 4.4

MAS core inflation 2.6 2.5

unemployment (end-period) 2.0 2.1

exchange rate (SGD/USD) 1.225 1.250

bank loans 17.2 18.5

2013

GDP 2.7 3.9

CPI (all items) 3.8 3.2

MAS core inflation 2.2 2.2

(Reporting by Kevin Lim; Editing by Kim Coghill)

Source: http://news.yahoo.com/economists-cut-singapore-growth-forecasts-040000808--sector.html

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