Singapore breaks loose of technical recession with 1.8% GDP boost

See which sector is the saving grace.

According to OCBC, Singapore escaped a technical recession again, with Q4 GDP flash estimates at +1.8% qoq saar.

Here's more from OCBC:

The Singapore economy grew by 1.1% yoy (+1.8% qoq saar) in Q4 2012 according to flash estimates, which beat our forecast of +0.3% yoy (-4.2% qoq saar). This meant that the Singapore economy escaped a technical recession, as both Q3 and Q2 growth data were also revised lower to 0% yoy (-6.3% qoq saar) and +2.3% yoy (+0.2% qoq saar).

Manufacturing was the laggard, while construction slowed, but services surprised on the upside with a Q4 rebound.

Manufacturing momentum was the main drag at -0.2% yoy in 2012, marking another contraction in Q4 at -1.5% yoy (-10.8% qoq saar), which reflected the continued weakness of the electronics cluster.

Construction also declined 8.9% qoq saar in Q4 due mainly to the decline in private sector building activities. The silver lining is that the services industries rebounded 7.0% qoq saar (+1.5% yoy) in Q4 after shrinking 17.4% qoq saar (+0.2% yoy) in Q3, led by the rebound in wholesale & retail trade, finance & insurance sectors, which is reflective of the tightness in the domestic labour market and the tentative green shoots emerging in the regional economies, including China.

We still look for around 2% growth in 2013, even with a sluggish H1.

Our 2013 GDP growth forecast is 2% yoy, an improvement from the 2012 full-year growth of 1.2% yoy, albeit H1 momentum may still be modest even though Q4 momentum had reaccelerated from Q3 which was the trough of the downcycle in 2012 as we predicted.

We expect a tepid H1 growth of around 1.2% yoy to gradually pick up some speed in H2 2013 to around 2.9% yoy.

Domestic asset prices remained buoyant into the year-end. S’pore’s private home prices climbed 1.8% qoq to a record 211.90 points in Q4, adding to the +0.6% qoq in Q3 2012, and bringing full-year gains to +2.8% yoy versus +5.9% yoy in 2011.

Non-landed private home prices rose 0.8% qoq in Q4, while suburban prices surged 3.4%. However, business sentiments are showing some tentative signs of caution – although overall bank loans added 0.5% mom in Nov, business loans moderated 0.4% mom even though manufacturing and building/construction loans continued to be resilient.

Consumer loans rose 1.7% mom, boosted by housing loans. Year-to-date for 2012, total bank loans growth is chugging along at close to 22% yoy.

Domestic challenges still remain, namely on the inflation front amid a weak external demand environment. Looking ahead, we expect the domestic interest rates to remain subdued given the major G7 central banks remain in easing mode, but global food prices and other inflationary pressures will likely sustain domestic headline CPI inflation to be still in the 3-4% yoy range in the meantime.

So far, the gradual growth recovery story coupled with the still elevated inflationary environment may mean little impetus to deviate from the current monetary policy stance in the near-term, especially with the SGD NEER still hugging the stronger end of its parity band for now.

Domestic companies still face a tepid external demand environment, while domestic cost pressures remain. The upcoming Budget, likely in February 2013, may offer some relief to SMEs, but the foreign manpower curbs and the productivity push are likely to remain mainstays, especially with global tail risks subsiding. For the man on the street, keep an eye on potential tweaks to housing and COE policies that have been in the news of late.  



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