Schroders predicts S'pore GDP growth at 5 percent

Schroders predicts S'pore GDP growth at 5 percent

SINGAPORE (Reuter): Schroder Securities Asia has cut its forecast for growth in the Singapore economy this year to 5 percent from 5.7 percent.

Schroders said in its weekly Asian Highlights report, received by Reuters on Wednesday, that the city-state's most recent trade figures had been much weaker than consensus and the next few months would reveal "an even more bleak export outlook".

It said Singapore's non-oil domestic exports dropped by 0.9 percent in value terms in May after rising 5.8 percent in April. Consensus expectations had been for a four percent rise.

"We have downgraded our 1997 GDP (gross domestic product) forecast from 5.7 percent to five percent and our new 1998 forecast is 5.4 percent," it said.

The forecast by Schroders, an arm of investment bank Schroders Plc, is well below predictions by most other economists and analysts, which tend to average between six and seven percent growth for 1997.

The government's own official forecast is for an expansion of five to seven percent in GDP.

Singapore's GDP grew by seven percent in 1996, 8.8 percent in 1995 and by double-digits in the preceding two years.

Schroders said it saw little good news on the horizon.

"In the electronics sector (which accounts for almost 60 percent of manufacturing output), final demand has been weaker than manufacturers' expectations, and with the current overcapacity in the key disk-drive segment, production and export values will slow," it said.

"Looking forward to 1998, it is difficult to see where growth will come from. We expect global demand to cool off both in the G-7 countries as well as in Asia as we go into 1998. For an externally driven economy like Singapore, there will hardly be any external props," it said.

It said consumers would be unable to take up the slack because they would be increasingly squeezed as personal gearing continued to rise.

"These cyclical problems will compound the ongoing structural problem in Singapore. There is an ongoing hollowing out of manufacturing industry to lower-cost locations, especially in the consumer electronics sector and in the low-end disk drive production."