Dampening growth outlook is a stronger Singapore dollar; rising domestic interest rates; additional property curbs and stricter foreign worker measures, says Maybank.
Slowing global growth, fading global electronics demand and the US-China trade war are also hurting exports and investment.
Budget 2019 introduced the Merdeka Generation Package which may provide a small positive spending stimulus in the second half, as 500,000 Singaporeans will receive their Merdeka cards in June and first Medisave top-up in July.
“We think MAS, like many other central banks, can afford to be patient,” says Maybank economist Chua Hak Bin in a Tuesday report.
Maybank is forecasting GDP growth of only 1.8% in 2019 and 2.1% in 2020, well below the 3.2% in 2018.
First quarter GDP growth probably weakened to about 1.2% by Maybank’s estimates, down from 1.9% in 4Q18 and 2.4% in 3Q18.
Monetary conditions have tightened, with the 3M Sibor climbing to 1.9% in March from 1.1% at the start of 2018.
Manufacturing likely stagnated in 1Q as global electronics cycle fades and US-China trade war hit growth.
Growth in services is also slowing due to weaker trade-related services, falling real estate transactions and softer loan growth.
Core inflation eased to a 9-month low of 1.5% in Feb, which is the lower bound of MAS’s core inflation forecast range of 1.5% - 2.5%.
As the Open Electricity Market is having a greater than expected impact on prices, Maybank expects MAS to lower its core inflation forecast to 1% - 2%.
Headline inflation is expected to pick up to 1.2% vs 0.4% in 2018. COE prices have bottomed and are rising steadily, which will translate to a rebound in private transport costs.
