Economic Outlook for 2015

Economic Outlook for 2015 – calm or choppy (Business Times)

 

Do you want to know if the Economic Outlook for 2015 is going to be calm or choppy?

Despite growing at 2.8% at 2014, the growth outlook for 2015 is still quite an uncertainty. As forecasted, Singapore is expected to grow at 2% – 4% for 2015.

So is it going to be calm or choppy ??? Let us analyse the top 3 benefits / risk factors as shown in the picture (Source: Business Times).

1. Oil price is likely to remain low – for oil importing countries like Singapore, this is a good news due to lower production cost as production, manufacturing and transport (almost everything) runs on oil! Lower production cost from these producers will most likely be passed on as savings to Singaporean consumers as well to remain competitive;

2. Rising interest rates – it is about time for the Feds to raise interest rates after years of loose monetary policy. As Singapore is an interest rate taker, business funding cost is likely to rise. Mortgage rates are also likely to rise, further dampening the weak property market. In fact as of date, the mortgage rate has already crept upwards as of starting of the year ;

3. Potentially expansionary Fiscal Policy – closer to the end of its term & to celebrate 50 years of establishment and independence, the Singapore government is likely to run a budget deficit for FY15. What it means is households will expect more “angbaos” from the government like GST offset packages etc. And the angbaos, unlike past few years, will be quite significant.

Base on the top 3 reasons, we have more reasons to believe that FY2015 will be more of a calm than choppy year for Singapore and the Economic Outlook for 2015 to be slightly rosy. Of course, we may be wrong, but who knows there will be another outbreak of Ebola virus or another War in Middle East (which is not predictable)?