Singapore’s growth potential understated

That’s down on the 3.6 per cent recorded in 2017 and on the current market expectations of 3 per cent growth.

“My stronger growth forecast is due to two key domestic drivers of growth that will become more apparent as the year progresses.”

In that sense, a relatively conservative forecast. But I am more bullish than the MAS and the market. My expectation is for gross domestic product (GDP) growth to come in at 4 per cent for 2018.

I’ll admit this makes me the most optimistic forecaster at present but let me step you through my thinking.

First off, the export recovery we saw last year is expected to continue into the early part of this year.

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However my stronger growth forecast is due to two key domestic drivers of growth that will become more apparent as the year progresses. The first is a recovery in residential construction activity on the back of the large en bloc transactions that have taken place since May last year.

A total of $S8 billion worth of en bloc transactions were done in 2017 and a further $S3 billion was concluded in just the first two months of this year.

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The second key driver is a large 25 per cent increase in development expenditure announced in Singapore's Budget 2018. That will be a significant boost for economic activity.

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Of course, I wouldn’t be a diligent economist if I didn’t recognise the risks to my forecast.

Most notably, if the current geopolitical trade tensions do turn into a full blown trade war there would almost inevitably be a downturn in global trade.

And that is an area I am watching closely.

Khoon Goh is Head of Asia Research at ANZ