Business

Nomura expects S’pore GDP to grow 1.3% next year, from 0.5% this year

Singapore may clock a faster pace of economic growth next year, said Nomura Holdings.

Gross domestic product (GDP) is likely to expand 1.3 per cent next year from an expected 0.5 per cent this year, noted the Japanese investment bank yesterday.

A global technology upturn, including rising demand for semiconductors, will buoy the electronics sector here, said Mr Euben Paracuelles, the bank's senior economist for South-east Asia.

The Government can offset some risks by tapping into the fiscal surplus it has run up in recent years, he said.

The tech rally is already evident in recent data.

Electronics manufacturing here grew year on year in October for the first time after seven straight months of decline. Semiconductor output still fell, but its numbers were much better than previous months.

The Purchasing Managers' Index compiled by the Singapore Institute of Purchasing and Materials Management has also shown improving sentiment for the electronics sector.

Still, Mr Paracuelles said Nomura's GDP growth estimate is lower than Singapore's potential rate, estimated by the bank at 2 per cent, as well as the mid-point of the Ministry of Trade and Industry's 0.5 per cent to 2.5 per cent forecast.

"We expect the economic recovery to be underwhelming, depressed by tepid external demand given our cautious view on China and the global economy," he said.

The drag from the tech sector may subside next year, but Nomura expects export growth to remain negative this year at -3.9 per cent before improving to -1.7 per cent.

"A relatively weak recovery in the export sector should continue to have dampening effects on the rest of the economy through weakening labour market conditions," noted Mr Paracuelles.

"However, we believe this will be partly offset by expansionary fiscal policy..." - THE STRAITS TIMES

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