Singapore Central Bank Sees Company Margins Under Further Strain

  • Wage growth may slow to 2.5% to 3% in 2016, MAS says
  • Central bank still sees modest economic growth this year

Singapore’s central bank said company margins may come under pressure because of a weakening global economy, putting the labor market under further strain.

Wage growth in the city state may slow to 2.5 percent to 3 percent this year, below the 3.5 percent seen last year, the Monetary Authority of Singapore said in its bi-annual Macroeconomic Review published on Wednesday.

“Given the more downbeat external outlook, corporate margins could come under further strain in the near term,” the central bank said. “While the weakness in the outlook was mainly confined to the trade-related industries last year, it appears to have spread to other sectors in recent months.”

The central bank unexpectedly eased its policy stance earlier this month, citing a more gradual pick-up in core inflation and a weak economy. Growth was flat in the first quarter on an annualized basis compared with the previous three months, according to the trade ministry.

The strain on corporates seems to be “contained within specific pockets of firms at the moment,” the MAS said, predicting modest economic growth of 1 percent to 3 percent this year, compared with 2 percent in 2015.

Company closures exceeded openings in Singapore in December for the first time since 2009, according to data from the statistics agency. That may signal a possible recession, Citigroup Inc. economist Kit Wei Zheng said in a report last month.

A softening in growth prospects across a number of Singapore’s key trading partners for the rest of the year will probably curb activity in export industries, the MAS said.

The bank also said Singaporean residents who lost their jobs are having a harder time finding new ones within six months, with the re-entry rate in the labor market falling steadily since March last year to 51 percent as of December.

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