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Singapore flags concerns with China, but maintains 2017 GDP growth forecast for now

Vessels pass an oil refinery in the waters off the southern coast of Singapore.
Edgar Su | Reuters
Vessels pass an oil refinery in the waters off the southern coast of Singapore.

Singapore affirmed its 2017 growth forecast of between 1 and 3 percent on Thursday, even as it turned slightly cautious on China's outlook a day after Moody's downgraded the rating of the world's second largest economy.

The Southeast Asian city state reported a 2.7 percent year-on-year increase in first quarter gross domestic product, in line with Reuters projection, the Ministry of Trade and Industry (MTI) said.

On a quarter-on-quarter basis, the economy contracted 1.3 percent, more than the 1 percent drop expected.

The export-reliant country benefited from the general uptick in global demand, with shipments of electronic products leading the 15.2 percent year-on-year rise in non-oil domestic exports in the first quarter.

Loh Khum Yean, Singapore's permanent secretary for trade and industry, said the better performance came on the back of improved growth prospects in advanced economies. However, he said rising anti-globalization sentiment and China's monetary conditions are key risks to watch.

Loh said barring the downside risks, Singapore's GDP growth is likely to come in higher than the 2 percent in 2016. The government also upgraded its export forecasts for 2017 to 4-6 percent from the previous flat to 2 percent.

ANZ economist Ng Weiwen noted that the authorities have turned slightly cautious on China, which is one of Singapore's largest trading partners.

"Specifically, tighter monetary conditions in China amidst financial deleveraging potentially resulting in a steeper-than-intended pullback in credit and investment spending is being flagged as a potential downside risk in the MTI statement today versus stability in outlook for China in the [central bank's April Monetary Policy Statement]," he wrote in a note.

Edward Robinson, chief economist at central bank Monetary Authority of Singapore, acknowledged that recent indicators in China "have slowed a little" but said the country is still on track to meet its growth target.

"Consensus hover around 6.5 percent and the consensus is reasonable at this stage. It is difficult to strike the correct balance between paving back credit growth in the economy and ensure that financial conditions don't tighten so much so quickly that they [hurt] growth," he said at a media briefing on Thursday.

"The Chinese authorities are managing the trade-off quite well and efficiently. At this point, our baseline view is for growth to be around 6.5 percent growth trajectory."

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