Tourism to lift Singapore retail sales further

The recovery in Singapore tourism, which was driven by a surge in Chinese visitors, is an encouraging sign that tourist arrivals have bottomed following 2013's ban on "zero-cost" holidays by Chinese operators. 

"Also, the recent drop in Chinese stock markets could pose some headwinds to a sustained improvement in tourism, and on the domestic front, the property market correction is likely to continue to weigh on private consumption compounded by the rise in Sibor", says Barclays.

Retail sales could recover further in the near term, as many shoppers likely deferred purchases ahead of the Great Singapore Sale, which runs from end-May to July. Meanwhile, despite the headwinds facing domestic consumption in Singapore, a tight labour market is likely to keep core inflationary pressures firm. 

"As such, the MAS is expected to keep policy on hold this year, but following yesterday's weak Q2 GDP print, we expect the SGD NEER to continue trading below the midpoint of the band in the coming months", says Barclays.