Singapore: Surprise rebound in Q4 GDP - Nomura

Analysts at Nomura note that the Singapore government’s advance estimates put GDP growth in Q4 2016 at 1.8% y-o-y, from a revised 1.2% in Q3 (from 1.1%), above expectations (Consensus: 0.3%, Nomura:  -0.6%).

Key Quotes

“This implies strong sequential growth of 9.1% q-o-q saar in Q4, from -1.9% in Q3.”

“The upside surprise was led by the services sector, which rose by 0.6% y-o-y in Q4 from 0.3% in Q3; in sequential terms, services activity jumped by 9.4% q-o-q saar after three consecutive quarters of decline. The manufacturing sector also outperformed, as growth rose to 6.5% y-o-y from 1.7% in Q3. These offset the decline in construction sector growth to -2.8% from -0.2%.” 

“Overall the advance estimates imply full-year 2016 GDP growth of 1.8%, above our forecast of 1.1% and the official forecast of 1.0-1.5%. Nonetheless, we remain cautious over the sustainability of the strong growth performance as a host of headwinds and downside risks − both external and domestic − continues to confront the economy. Singapore’s ultra-open economy and financial centre will likely be one of the most exposed in Asia to the UK leaving the European Union, the threat of trade protectionism from the US and political risks in Europe. The high levels of household and corporate leverage also imply vulnerability to a likely faster pace of interest rate hikes in the US, which should further tighten financial conditions in Singapore.”

“Meanwhile, the residential property market is likely to remain on a gradual downtrend and labour market conditions have also weakened, especially for skilled workers. We continue to forecast full-year growth of 0.7% in 2017, below the official 1.0-3.0% forecast range.”