Recently, experts have suggested that Singapore's economy may be back on track for moderate growth this year, in part because of the economic growth in the United States. Demand from the US could help Singapore exports.
The China Affect
Although the forecast in Singapore is for moderate growth, sluggish demand from China and the Eurozone could have a negative impact on certain sectors according to MAS, the Monetary Authority of Singapore. The report issued by MAS suggests that Singapore’s GDP growth would probably settle at approximately 2.5% to 3.5% this year. Expectations are for a similar pace in 2015.
Growth performance is somewhat even, and expectations are for this to persist. Sectors that cater to US demand are likely to expand the most, whereas those tied to China and the Eurozone’s slowing economies may slow. Expect uneven growth to persist in various domestic sectors as well, although some will remain resilient in regards to underlying demand. Labor intensive industries should feel pressure from higher man power costs.
Activity in Singapore
Over the last six months, domestic activity has been relatively subdued, with the GDP contracting by approximately 0.1% over the period between April and June. In the third quarter, momentum remained weak, with a provisional growth no more than 1.2% according to MAS.
The Monetary Authority also suggested that the manufacturing sector is likely to see some growth in the value chain of higher margin activities such as research and development, and services. For example, there has been a significant investment increase by semiconductor firms in Singapore with the intention to expand R&D and supply chain operations. Market share of electronics by these semiconductor firms more than doubled between 2010, and 2012, from 11% to 23%.
The Central Bank of Singapore has suggested that the tight labor supply and heavy demand for workers is likely to continue putting upward pressure on costs. It has announced that the labor market expects to remain tight in the non-tradable and manufacturing sectors. In the future, the creation of new job opportunities will depend largely on the continued growth of industries such as:
* Information and communication
* Professional services
* Financial services
Singapore may follow the lead of more advanced economies that appreciate skills over academic wages for employability. In regards to inflation, the MAS commented that CPI-All items inflation could drop below 0.5% during the fourth quarter of this year. Overall inflation is expected to be between 0.5% and 1.5% in 2015, compared to 1% and 1.5% in 2014.