All signs point to slowdown in Singapore economy next year: analysts
By Derek Cher, Channel NewsAsia
http://www.channelnewsasia.com/stories/singaporebusinessnews/view/122588/1/.htmlSINGAPORE: Thanks to robust growth in the first half, the Singapore economy looks set to finish the year as one of the fastest-growing in the region.
Full-year GDP is expected to jump by 8%-8.5%.
But looking into 2005, all signs point to a slowdown.
Growth for next year has been forecast at between 3% and 5%, but analysts say a downward revision cannot be ruled out.
Falling technology demand and higher oil prices have hampered Singapore's growth in the second half of the year.
After four quarters of double-digit growth, the economy contracted in the third quarter.
While Q4 numbers are expected to show a pickup, the outlook for next year is clouded by the slowdown in the global IT sector.
And some analysts fear that the slowdown may accelerate next year.
"We have not seen the bottom, for example, in the IT sector. The risk is still for a much stronger decline in the IT sector than we expect. If it does, then it will have a big impact on the potential growth in Singapore and the rest of the region which is heavily dependent on electronics," said analyst Sani Hamid.
And there are also questions over the highly volatile pharmaceutical sector.
In recent months, output in this sector has been erratic as manufacturers shut down plants for maintenance and product changes.
Even though the biomedical sector has a very significant effect on headline GDP, economists say it will have very little impact on domestic consumption.
They expect the sector to continue to be volatile as it is still dominated by a few international companies operating here.
But perhaps the biggest question mark lies over oil prices.
US crude futures are now trading at some 18% below record highs set in October - but they're still up some 30% since the start of the year.
G K Goh's regional economist, Song Seng Wun, said: "As long as the nominal price for oil stays at this current level, between US$40 and US$50, then I don't think it will do much to global economy in the next 12 to 15 months. It is when nominal prices reach somewhere around US$60 or more, then in real terms that will have more of an impact on business and consumer expectation. And, that could affect demand and economic activities."
Other major downside risks include developments in the US and China.
Singapore's economy - which is is heavily dependent on exports - will be hit by any slowdown in the US or a hard-landing in China. - CNA