Recession Avoided, But Growth Still Hard To Come By
Singapore ' s economy expanded at a modest 1.8% quarter-on-quarter (q-o-q), seasonally adjusted annualised rate in Q412, slightly beating our expectations for the city-state to enter a technical recession. At the same time, the economy ' s year-on-year (y-o-y) expansion picked up pace from Q312 ' s downwardly revised 0.0%, posting at a still-tepid 1.1%. Nevertheless, the government ' s preliminary estimates, which are susceptible to sizeable revisions, indicate that the economy grew by just 1.2% for the entire year, coming in below even our relatively downbeat estimate of 1.5%.
While the country's GDP figures are notoriously volatile, the economy has been consistently underperforming since Q112. Given Singapore's huge exposure to global trade flows, the best proxy for the country's economic activity tends to be export performance. From January through November 2012, exports expanded by just 0.4% over the same period in 2011, signalling a stall in demand for Singaporean goods. As we wrote recently ( see: 'Struggling Exports Warrant Growth Downgrade', December 18 2012), Singapore's substantial export sector has been hit hard by flagging global demand for electronics, in particular the integrated circuits (ICs) and parts of PCs that make up the majority (58.9% in Q312) of the city-state's electronics shipments.
|Late To The Party|
|Asia - Total Exports, % chg y-o-y|
East Asian exporting powers like Taiwan and South Korea have shown vestiges of what we believe will be a transitory pick-up in electronics exports in line with an expected growth bounce in China. In contrast with these countries, Singapore ' s struggles have continued, and we believe that prospects in 2013 will likewise be limited by the challenging demand outlook for the particular mix of electronics that the city-state manufactures. As such, we are forecasting only a moderate reco very in exports for this year, and expect full-year real GDP growth to come in below trend at 2.5%.
Hopes Resting On Private Consumption
With export prospects limited, the Singaporean consumer will be integral in keeping the economy ' s coll ective head above water. Healthy wage growth, coupled with one of the tightest labour markets in the world , have thus far supported private consumption in t he city-state, and we expect this component to clock another solid year with real growth of 4.0% in 2013 (slightly down from our previous forecast of 4.5%) .
|Can The Consumer Carry The Load?|
|Singapore - GDP At Constant 2005 Prices, % chg y-o-y & Subcategories|
However, should the economy ' s external malaise intensify, we note that this could have kno ck-on effects on the domestic labour market, as well as on the city-state ' s buoyant asset prices. Such a scenario could in turn stem the tide of the Singaporean consumer story, eliciting downside risk s to both our relatively bullish expectations for private consumption and our forecast for headline growth.