SINGAPORE (Dec 17): Singapore’s bottoming economy is set to have tepid recovery boosted by a revival of the services sector in 2020, analysts at DBS say.

“The services sector continues to be a bright spot with loan growth and container throughput growth improving in September 2019. This suggests that trade activity is improving, supported by stronger business loan growth,” note analysts Kee Yan Yeo and Janice Chua.

The duo is also looking at a simultaneous bottoming in the manufacturing sector on the back of rising global semiconductor shipments and a resultant improvement in billings.

Drawing reference to November’s Purchasing Manager’s Index, they note that while the 49.7 reading logged still reflects a contraction, it is at the highest level since April this year.

And with a 0.8% m-o-m growth – the highest since September 2018 – the sector is showing signs of recovery, they point out.

With the Phase 1 deal talks between the US and China last Friday indicating that no further tariffs can be expected, global trade may just be revived. And this could prove beneficial to Singapore as it translates into a further lift to Singapore’s manufacturing sector in the months ahead.

And with Budget 2020 being christened the election budget, Yeo and Chua suggest that the $15.6 billion surplus amassed by the current government may trickle down through a strong fiscal thrust. This will further boost the domestic economy, they add.

“Policymakers would be aiming to strike a balance between achieving near-term counter-cyclical and preserving on longer-term economic transformation,” observe Yeo and Chua.

To this end, they foresee that the budget “is likely to focus on short-term counter-cyclical needs such as measures to aid companies during the economic slowdown and mitigate the impact of a weaker labour market”.

As for longer-term growth, the duo expect more support for skills upgrading and investments in technology.