Singaporean economy likely to have grown weakly in Q1 2019, MAS to keep rate policy unchanged

Singaporean economic growth estimates for the first quarter is set to release tomorrow. According to a DBS Bank research report, the economy is likely to have grown 1.6 percent on a year-on-year basis, down from an already sub-par performance of 1.9 percent in the prior quarter. On a sequential basis, growth is likely to have provided some respite with an expansion of 3.4 percent quarter-on-quarter.

However, this can also be seen as a technical recovery after a paltry reading of 1.4 percent previously. The manufacturing sector might be the key drag, and likely to report the first contraction of 1.1 percent since 2015, down from a growth of 5.1 percent in the fourth quarter of 2018. Indeed, external headwinds have picked up.

Global electronics demand is easing, and the trade war is adding to the fall in the near term. All these are on top of an ongoing deceleration within China. Though there are some emerging signs of the cycle bottoming-out, and upside will only materialize later in 2019, said DBS Bank. Before that, a bad outcome in the first quarter is almost a given. Yet, the services sector might pick up some of the slack. Higher turnovers in the financial markets and increased IT and tourism activities might give some impetus.

“We expect a better showing in the key services cluster after the disappointment in 4Q18. A growth bounce back to above 2 percent is on the cards. Overall, 2019 is on for a slow start. With inflation stable and the need to cushion growth momentum, we expect the Monetary Authority of Singapore to keep its exchange rate policy unchanged in the upcoming meeting after two consecutive rounds of tightening last year”, added DBS Bank.