HSBC has cut its growth forecast for the Singapore economy this year to 5.8%, from the 6% projected previously. This is because of an anticipated slowdown in the second quarter.
HSBC said two large consecutive drops in industrial production have triggered concerns about the second quarter's gross domestic product (GDP), although the declines were mainly due to the volatile pharmaceutical sector. However, there are some potential bright sparks.
According to HSBC, double digit employment and wage growth, negative real interest rates, and a sizeable fiscal support suggest that the underlying growth picture remains strong.
In addition, the strong trend of rising public housing prices will also help to offset the negative wealth effects of a weak equity market.
So HSBC believes there is a very good chance for the economy to bounce back in the third quarter.
The Singapore government's official forecast is for the economy to grow between 4 and 6 per cent this year.
The Trade and Industry Ministry is scheduled to release its advanced estimates for Singapore's second quarter economic growth next Thursday. - CNA/ms
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