Economics of Singapore

The global economic outlook is expected to improve modestly in the coming months, led by a sustained recovery in the US and Eurozone economies. In the US, the economy is expected to post modest growth in 2014, supported by rising private consumption expenditure and a recovery in business investments. The Eurozone economy is expected to return to growth this year, on the back of a reduced pace of fiscal tightening and an accommodative monetary policy. In Asia, China’s growth is expected to moderate slightly in 2014 as the government continues with credit tightening measures and reforms to re-balance the economy. The ASEAN economies are likely to remain resilient, supported by robust domestic demand.

Nonetheless, uncertainties in the global macroeconomic environment remain. In the US, there are uncertainties over the pace at which the Federal Reserve will exit from its accommodative monetary policy. If the pace of monetary policy normalisation increases unexpectedly, financial markets may react adversely and business sentiments in the US may also be dampened. In China, there is a risk that policy moves to rein in credit growth may lead to unintended consequences, such as a sharper-than-expected economic slowdown, if they are not well calibrated.

d) Summary of Overall economic outlook.

Against this backdrop, the Singapore economy is expected to grow at a modest pace in 2014. In tandem with the gradual improvement in the global economy, externally-oriented sectors such as manufacturing and wholesale trade are likely to provide support to growth. Domestically-oriented sectors such as business services are also expected to remain stable. However, continuing tightness in the labour market is expected to weigh on growth in some labour-intensive sectors. Taking these factors into consideration, the 2014 growth forecast for the Singapore economy is maintained at 2.0 to 4.0 per cent.