Quoteworthy: "The Texas whipsaw massacre." — Jeffrey Halley, Oanda’s senior market analyst, referring to the wild swings seen by the oil and stock markets this past week.
Singapore’s GDP tipped to grow by 4.0% in 2022: MAS survey
Singapore’s gross domestic product (GDP) is estimated to expand by 4.0% in 2022, according to market watchers in the Monetary Authority of Singapore’s (MAS) survey.
The survey, which was released on March 9, polled 26 economists and analysts, who sent in their responses after the hostilities in Ukraine on Feb 24. The forecasts ranged from as low as 3.0% to as high as 4.9% in 2022.
On a sectoral basis, the growth in Singapore’s GDP in 2022 is likely to be led by accommodation and food services, construction, as well as nonoil domestic exports, with estimated expansions of 9.1%, 9.0% and 7.8% respectively.
Conversely, the manufacturing, finance and insurance, and private consumption sectors are likely to register moderate growth at 4.1%, 4.1% and 4.5% respectively.
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In the survey, market watchers have also estimated CPI-All Items inflation and MAS Core Inflation to come in at 4.0% and 2.5% respectively in 1Q2022.
As for the labour market, the respondents expect the unemployment rate to reach 2.2% at year-end, unchanged from the previous survey.
For 2023, economists are seeing a GDP growth of 3.0% with a range of between 3.0% and 3.9%. CPI-All Items inflation is forecast at 2.4% in 2023, while MAS Core Inflation is expected to come in at 2.4%.
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Of the economists and analysts surveyed, 94.5% of respondents feel Singapore’s economy is likely to face downside risks from a sharper-than-expected rise in inflation driven mainly by higher energy and food prices. This comes with an associated increase in the pace of monetary policy tightening by major central banks.
Respondents were also concerned about the downside risks arising from the geopolitical tensions from the Russia-Ukraine conflict.
Risks from a further deterioration in the Covid-19 situation, and an associated re-tightening in public health measures were also cited.
At the same time, the prospect of re-opening borders to international travel emerged as the most frequently cited upside risk to Singapore’s growth outlook.
Other upside risks include a stronger-than-expected expansion in manufacturing output, as well as from more robust growth in China, driven for instance by macroeconomic policy easing — Felicia Tan
Oil’s wild week continues as prices recover after huge slump
Oil edged higher after the biggest drop since November as the fallout from Russia’s invasion of Ukraine continues to rattle markets.
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Futures in New York rose near US$111 ($151) a barrel after plunging 12% on March 9. The US approved legislation barring imports of Russian crude as lawmakers of both parties demanded stronger punishment of the major oil producer for its war in Ukraine. The ban will go into effect 45 days after it is signed into law.
Oil has soared since the invasion, in part due to fears that the loss of Russian energy flows may stretch an already tight market. Still, the heads of Opec and Chevron Corp said this week there is no shortage of oil, while Iraq insisted there is no need to ramp up production more than planned.
Oil sank on March 9 after the United Arab Emirates called on Opec+ to boost output faster, though the nation’s energy minister appeared to temper that message a few hours later. Opec+, which counts Russia as a key member, has so far resisted calls from consumers to pump more, arguing that the surge in prices is driven by geopolitical tensions rather than an oil shortage.
“Opec+ will have to jump through many hoops to agree to deviate from its current road map,” said Vandana Hari, the founder of Singapore-based Vanda Insights, describing the market as “panic-stricken”.
The invasion is reverberating through global markets and heaping inflationary pressure on governments that are trying to encourage growth after the pandemic. Everything from wheat to metals and natural gas is soaring, with retail gasoline prices in the US jumping to a record this week. — Bloomberg
South Korea’s new president is tough on China, pro-nuclear power
Conservative Yoon Suk-yeol’s narrow win in the South Korean presidential election could mean big policy shifts for Asia’s fourth-largest economy — if the political newcomer can find some way around or through a hostile legislature.
The former top prosecutor quit President Moon Jae-in’s government in a dispute over corruption investigations last year and went on to defeat Moon’s Democratic Party successor, former Gyeonggi Governor Lee Jae-myung, in the race for president on March 9. Yoon, 61, has called for greater private-sector-led growth and a tougher approach toward China and North Korea. The People Power Party candidate also faces opposition from many female voters, who felt alienated by his statements on the campaign trail.
Here are six things to know about Yoon:
1. China tensions loom
Yoon pledged on March 10 to make South Korea a “pivotal country” in the global fight for “freedom, peace and prosperity,” suggesting he might be a more enthusiastic partner in US President Joe Biden’s efforts to build a coalition of democracies. That could include greater participation in a US push to develop supply chains less reliant on China, with South Korea’s massive semiconductor industry a key focus. Yoon has also called for an additional deployment of the US-made missile interceptor system known as THAAD. China banned sales of group tour packages and appearances of Korean celebrities on television shows in retaliation for Seoul’s decision to deploy the missile shield system about six years ago.
2. Markets like him
South Korea’s main Kospi index jumped after Yoon won the race, encouraged by his business-friendly campaign pledges. His call to abolish a capital gains tax would end a Moon plan to introduce a tax of as much as 25% on investors next year. Market players said Yoon could lower the corporate tax rate, which would help a sluggish market. “I will create jobs and strengthen our middle class by shifting the focus of our economy toward the private sector rather than leaving it be led by the government,” Yoon said on March 10.
3. Gender disputes simmer
Yoon’s campaign courted young male voters opposed to gender-equality measures by arguing on the campaign trail that Moon was stacking the system against them. He also promised to close the Gender Equality Ministry, which could deal a blow to plans to narrow a gender wage gap that ranks as among the widest in the developed world and grew larger during the coronavirus pandemic.
4. Legislative gridlock awaits
The new president faces a National Assembly where Moon’s progressive Democratic Party holds a supermajority and has little appetite to help with Yoon’s domestic agenda. The next parliamentary election will not come until 2024, so Yoon could face gridlock for at least the first two years of his term — and perhaps even longer if the PPP cannot capture a majority. This means that Yoon might have to resort to executive orders to advance his agenda.
5. Easier for chaebols
South Korea’s sprawling “chaebol” conglomerates that account for large parts of the export-driven economy, such as Samsung, Hyundai and LG, will likely be spared any calls to add transparency to their corporate management. Yoon steered clear of calling for new restrictions on them during his campaign, while conservative governments have usually avoided imposing measures to curb their powers.
6. Nuclear power priority
The president-elect said he would invest and support nuclear and wants to export the country’s technology overseas. Nuclear makes up about 29% of domestic power generation. Under the Moon administration, the installed capacity for nuclear power was projected to fall to 19.4 gigawatts by 2034, from the current 23.3 gigawatts. — Bloomberg
Cover chart: Bloomberg
