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Chart of the Day: Public investment to mitigate the weakness in private investment
Household spending added a meagre 0.2ppt to 2016 growth.
The fall in private investment has been mitigated by the improvement in the public investment, helping Singapore GDP growth to spike 2.9% in 2016.
According to Standard Chartered, private consumption may remain weak, given that household spending added a meagre 0.2ppt to 2016 growth and spending on cars faced a high base effect.
"We expect 2017 spending levels to remain flat versus last year. With labour market conditions softening and real wages easing in Singapore, we maintain our cautious view on consumption," the firm noted. The weakness, however, will continue to be mitigated by the strong public investment.
"The government is likely to maintain its infrastructure development plan, including building new train lines and hospitals. However, we expect private investment to remain soft amid poor external demand. Private investment is down across most sectors, including in residential buildings and machinery and equipment. Public investment in non-residential buildings was up around 33% y/y while construction works increased around 16% y/y in 2016. The upcoming budget is likely to focus on medium-term measures to prepare the workforce for the changing economy, but it may maintain the infrastructure spending level," Standard Chartered explained.
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