GDP growth downtrend to continue till 1H12

GDP in the fourth quarter of 2011 came in at 3% YoY, lower than 3Q11's 4.3%.

According to DBS, preliminary GDP figures for 4Q11 were announced by the Financial Secretary in his Budget yesterday. 4Q11 GDP came in at 3.0% YoY versus 4.3% in 3Q11. Sequentially, the economy grew 0.3% (QoQ sa) after contracting 0.1% in the previous quarter. This concludes full year growth at 5.0% YoY, in line with our projections.

Here's more from DBS:

The fall in GDP growth was primarily due to a slowdown in net exports. In response to the eurozone crisis, merchandise exports have slowed significantly, growing a mere 7.0% YoY in 4Q11 versus 4.3% in 3Q11. The downtrend is expected to continue into at least 1H12.

Real exports and imports of goods and services which grew 2.5% and 3.7% respectively in 4Q11, compared with -0.4% and 1.5% in 3Q11, helped to drag down net exports in absolute terms and knocked off 2.1% from headline growth. Investment however charged ahead at 9.0%, slightly down from 11.2% in 3Q11 but still well above trend growth of 2.1%. Growth has been strong (>7.0%) for three consecutive quarters, with private and public investment each contributing to about half of the growth.

Private consumption has lost steam in 4Q11, growing 6.4% versus 9.8% in 3Q11 as consumer sentiment began to sour. This should be reflected in Dec11 retail sales data scheduled for release tomorrow. Retail sales value and volume are projected to grow 21.5% and 14.9% respectively, down from 23.5% and 16.9% in November.

Thankfully, the government’s $6000 cash handout should boost retail sales at the margin for December and subsequent months down the pipeline as only two-thirds of eligible applicants registered for the handout as of Nov11.

Looking ahead, the ongoing eurozone crisis alongside falling property prices will prolong the gloom in local consumer confidence. To arrest a steep fall in retail sales growth, visitor spending (approx. 30% of retail sales) needs to hold up.

Unfortunately, tourist arrival growth is set to slow. In the aftermath of the previous crisis, mainland tourist arrivals (approx. 60% of the total) fell on a YoY basis in 2Q09 and were flat in 3Q09 before picking up noticeably in 4Q09. The Tourism Board projects total and mainland tourist growth will fall to 5.5% and 7.6% in 2012 respectively from 16.5% and 23.9% in 2011, which will negatively impact GDP growth.