SINGAPORE TO ENTER AN ECONOMIC DOWNTURN IN 2017

In recent years, Singapore has shown phenomenal economic development, and steady growth has been expected to continue in the future. However, it seems that domestic concern about economic slowdown is steadily increasing.

In a survey by the Monetary Authority of Singapore (MAS), economists revised down their projected growth in GDP per capita in 2017 to 1.5%, from 1.7%.

In Singapore Business Federation’s National Business Survey too, 50% of businesses reported a pessimistic outlook, with demands for the government to act in some way.

WILL THE SINGAPORE DOLLAR BE GUIDED DOWN?

IMF data for GDP per capita, as of October 2016, is $52,888 (around 6.18 million yen). It was in 2015 that a cloud first appeared over the economy of Singapore, which has the 8th highest GDP in the world (and, in Asia, is second only to Macau).

Signs of slowdown included a 4% y-o-y decline in GDP in 2Q 2015, and a 1.5-point downward revision to 2.5% by the Ministry of Trade and Industry of the upper edge of the range of its 15-year forecast for growth.

Factors such as growth of 3.7% in Q4 2016 have allowed hope of recovery, but some analysts suggest that the market is awash with negative factors for the Singaporean economy, such as slowdown in the Chinese economy, Brexit, and the outcome of elections in other parts of Europe.

The pessimistic atmosphere is also reflected in the quarterly surveys by MAS. In the December survey, the median growth forecast by 22 economists for 2016 was reduced to 1.4% (0.8 points down on the forecast in the September survey) and for 2017 to 1.5% (0.2).

Meanwhile, in the SBF survey compiled in October and November last year, 48% of the 1,100 participating companies reported a pessimistic outlook for the economy in 2017.

If economic slowdown does occur in Singapore, with its high number of foreign workers, it is likely that public dissatisfaction will develop into an immigration problem. Economic slowdown pushes up the unemployment rate, and voices calling for further strengthening of controls on foreign workers are likely to strengthen among those seeking jobs. However, strict controls may deliver the final push toward economic slowdown.

Foreign exchange policy is key for Singapore, and it has been reported in the local media that some commentators are forecasting a policy switch towards a weakening Singapore dollar.

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