Based on advanced estimates, Singapore’s economy slowed to 1.3% y/y in 1Q2019 from 1.9% y/y in 4Q2018. It is the weakest growth since 4Q2015. On a q/q seasonally-adjusted basis, GDP grew by 2.0% from 1.4% in 4Q2018. The MAS revised downwards its core inflation outlook for 2019 to 1.0%–2.0% from 1.5%–2.5% previously but kept the headline inflation forecast unchanged at 0.5%–1.5%. Also, it maintained the GDP outlook at 1.5%–3.5% though it indicated GDP growth can come in slightly lower than the midpoint projection.

We expect the economy to grow around 2.3% for 2019 on the back of weaker export growth, in view of moderate global growth and a maturing tech cycle. With slower growth and softer inflation, we expect the Monetary Authority of Singapore (MAS) to maintain its current monetary policy stance. Room to ease its monetary policy in the October meeting is there if growth continues to undershoot.

• Based on advanced estimates, the economy slowed to 1.3% y/y in 1Q2019 from 1.9% y/y in 4Q2018. It is the weakest growth since 4Q2015. On a q/q seasonally-adjusted basis, GDP grew by 2.0% from 1.4% in 4Q2018.

• The drag on growth came primarily from the poor manufacturing sector which fell by 1.9%y/y after a gain of 5.1% y/y in 4Q2018. The drop in output from the precision engineering and electronics clusters more than offset the gain in output from the biomedical manufacturing and transport engineering clusters.

• In contrast, construction grew by 1.4% y/y in 1Q2019 from a decline of 1.0% y/y in 4Q2018. This marked the first positive growth after reporting 10 consecutive quarters of decline, primarliry supported by improvement in private sector construction activities. Besides, the services sector grew firmly by 2.1% y/y from 1.8% y/y in 4Q2018 supported by the information & communications and business services sectors.
• Meanwhile, the MAS maintained its monetary policy by keeping the Singapore dollar's current rate of appreciation, a decision that fell in line with our view. The width of the policy band and the level at which it is centred remain unchanged.
• But the tone of the MAS was slightly dovish. It revised downwards its core inflation outlook for 2019 to 1.0%–2.0% from 1.5%–2.5% previously owing to subdued global crude oil prices and a stronger-than-expected impact from the open electricity market. But the headline inflation forecast was left unchanged at 0.5%–1.5% and GDP forecast remained at at 1.5%–3.5%. However, the MAS indicated GDP growth can come in slightly lower than the midpoint projection.

• We expect the economy to grow around 2.3% for 2019 on the back of weaker export growth, in view of moderate global growth and a maturing tech cycle. With slower growth and softer inflation, we expect the MAS to maintain its current monetary policy stance. Room to ease its monetary policy in the October meeting is there if growth continues to undershoot.

Source: AmInvest Research - 15 Apr 2019