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CapitaLand Mall Trust
Annual Report 2015
Independent Retail Market Overview
Economic Growth
At its heart, Singapore is a trading nation. It is a hub
for international trade and finance, as well as having
a significant export focused manufacturing sector.
As such, the state of the global economy means more
to Singapore than other countries.
A cur sor y l ook at the wor l d’s med i a at the
commencement of 2016, and you could be forgiven
for taking a rather dim view of the global economy.
The Middle East, Europe and South America are all
facing major challenges in terms of economic stability,
security and politics.
There are, as always, reasons for optimism. In 2015,
the United States (US) Federal Reserve increased
interest rates for the first time since the global financial
crisis (GFC), while the United Kingdom’s (UK) solid
growth has been impressive given the depths of its
recession. Japan’s prospects look more positive than
at any time in the past decade, and Europe could
well benefit from the long-term growth implications
of receiving large numbers of educated and young
migrants from Syria.
But the key for Singapore is the growth outlook for
China, which has been crucial in driving growth in Asia
over the past decade. China’s economy is slowing,
and while we expect the Chinese Government still has
policy or tools to avoid a ‘hard landing’, the new norm
is likely to be growth of between 5.0% and 6.0% per
annum, not the 8.0% plus the world got used to.
From a domestic perspective, there has been little
to drive optimism in recent months. Income growth
has been very low, which has flowed through to
retail sales. The business sector has not picked up
the slack, with business investment not contributing
particularly strongly to gross domestic product (GDP).
Singapore’s Government’s cooling measures,
particularly within the housing market have had a
material impact on the slowdown of the economy.
House prices have been drifting down since 2013, and
absorption remains well below the historical peaks.
Despite these negative factors, Singapore remains a
fundamentally solid economy. Consumer confidence
remains relatively high; Nielsen ranks Singapore as the
14th most optimistic country in the world.
Singapore is also a great place to do business – the
Economist Intelligence Unit (EIU) classifies Singapore
as the number 1 country in the world. GDP growth has
averaged 5.2% per annum over the past decade and
real disposable income growth of 4.0% per annum.
This mixed outlook means that economic growth over
the next few years is likely to be lower than what has
been achieved in recent history. We expect to see
annual growth of between 3.0% and 3.5% to 2020,
with growth increasing over time. While Singapore
certainly faces headwinds, we believe there is every
reason to be optimistic over the long term.
Inflation
Inflation for 2015 has remained subdued due largely to
low global oil prices, SG50 related price promotions as
well as budgetary and other one-off cooling measures.
Going forward, most of the disinflationary measures
implemented are coming to an end which should
lead to increased domestic inflationary pressure.
However, the pass-through to consumer prices will
be constrained due to a subdued economic growth
environment. As a result, we expect inflation to remain
around 1.0% for 2016 before increasing slightly over
the next five years.
Population
Low population growth and the aging population have
always been among the key concerns of Singapore’s
Government. Singapore’s population is aging,
and growth is slowing. The main source of growth in
recent years has been migration.
With people as Singapore’s only natural resource,
the Government is aware of the impact of an aging
population, and is introducing a series of measures
to counteract it. This will come in the form of helping
young couples with housing issues, increasing
paternity leave, baby bonuses, providing support
for parents with care-giving as well as encouraging
flexible work arrangements.
The easiest way for the Singapore’s Government to
increase population growth would be through increased
migration. However, this carries its own political risks
- the release of a Government’s White Paper in early
2013 calling for high levels of immigration resulted in
protests with many locals concerned about the loss of
jobs to foreign workers. The Government responded
by cutting migration, but this has had a major impact on
businesses that rely on foreign workers.
