Preliminary estimates indicate that real GDP grew by +3.1% y/y in Q4 2017, a slower pace than in Q3 (+5.4% y/y). Construction continued to contract in Q4 (-8.5% y/y), manufacturing decelerated (+6.2% y/y, down from +19.2% in Q3) and services remained broadly resilient (+3%, after +3.2% in Q3). In 2017 as a whole, the economy grew by +3.5%, a noteworthy acceleration from +2% in 2016. Business surveys suggest that economic activity will continue to expand in the near term, albeit at a slower pace. In particular the Nikkei Singapore PMI (covering the private sector) decreased to 52.1 points in December (from 55.4 in November) as the increase in both output and new orders moderated. In that context, we pencil in slower but still firm economic growth of +2.9% in 2018, thus remaining well above the average annual +2% recorded in 2015-2016. Export growth is set to moderate as tighter financing conditions in China are likely to lead to slower demand growth. Moreover, the economic policy mix is expected to tighten, with a potential hike of the GST tax rate and tighter monetary policy by the MAS in the wake of higher inflation.
