After exuberantly celebrating 50 years of independence in 2015, Singapore came down to earth with a bit of a bump in 2016. Economic growth slowed further, employment conditions weakened, property prices continued to fall, retail sales ex-cars were weak and bad loans accumulated in some sectors. Looking into 2017, a mood of caution persists in business surveys, unsurprising since local firms remain concerned about high costs, weak markets and an increasingly uncertain global environment.

There are good reasons to be concerned because times are tough, but there are also some reasons to be confident that Singapore will overcome these challenges as it has done before. We think that there are four global and two domestic drivers that will determine the country’s performance in the coming year.

Global demand cycle: Positive
Singapore is a small and highly open economy that is extremely sensitive to the ups and downs of the global cycle and the volatile fortunes of its regional hinterland. With lead indicators for world trade improving, a rebound in global demand is underway and will produce an upside surprise to economic growth for a number of reasons:
•    First, Singapore’s exports remain well cor- related with demand in the developed economies of the US, Europe and Japan. There are signs that all three are likely to enjoy somewhat better growth next year than in the past two years. In particular, the US economy is, we believe, gathering momentum rapidly as business confidence soars on expectations of the new administration delivering radical tax cuts, higher defence spending and wide-ranging deregulation. Since these additional boosts come just when better functioning labour, housing and credit markets were anyway pushing up the economy, economic growth is likely to surpass market expectations.