Singapore Business Forecast Report Q4 2013 - New Study Released

Core Views

Singapore's economy is in the midst of a longer-term rebalancing as the government looks to reduce the country's reliance on foreign labour, and this will have substantial effects on inflation and economic growth over the medium-term.

Despite concern over Singapore's increasingly leveraged households, in which total debt has soared to approximately 150% of income, we reiterate that the country's household balance sheets are still, on the whole, quite healthy. While there will undoubtedly be repercussions for both lower income households as well as those that have leveraged themselves aggressively (in order to take part in the country's housing boom) once global interest rates begin to normalise, we nevertheless stress that Singapore remains among the best-placed developed markets to weather such a phenomenon.

Full Report Details at
- http://www.fastmr.com/prod/673203_singapore_business_forecast_report_q4_2013.aspx?afid=301

Key Forecast Changes

We continue to believe that Singapore's trade prospects for the remainder of 2013 remain difficult, and have downgraded our fullyear export and import growth forecasts to 1.1% and 2.1% from 2.9% and 4.0%, respectively, bringing the country's 2013 real GDP growth forecast to 2.2% from 2.5% previously.

As a result of mounting downside risks, including a continuing deterioration in external demand conditions, we have downgraded our end-year Singapore dollar forecast to SGD1.2500/US$ from SGD1.2300/US$ previously. Likewise, we have downgraded our 2013 average for the unit from SGD1.2300/US$ to SGD1.2500/US$, and we believe that risks to this forecast are relatively evenly balanced.

Looking ahead, we see little reason to expect a considerable export rebound before the end of 2013, and continue to believe that, while trade activity may continue to improve into Q313, any recovery is likely to be transitory. Nevertheless, Singapore's external position remains one of the most sound in the world.

Key Risk To Outlook

Despite their continued health, a longer than expected downturn in global economic activity, or an acute financial or economic crisis stemming from either the eurozone or the US' potential fiscal cliff could erode the remaining strength in both the labour and asset markets in Singapore. In such a case, the very low unemployment rate of 1.9% could rise towards 2.5%, and private property prices could see a sharp correction.

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