Singapore Cuts Growth Outlook Amid Escalating Trade Disputes

Marco Green
August 13, 2019

Faced with the slowest growth the city-state has seen in a decade, Singapore has reduced its expected growth from 1.5 to 2.5 percent for 2019 down to a 0 to 1 percent for 2019, repots Straits Times. The growth is expected to come in at around the mid-point of the forecast range.

It added, "Against this challenging external macroeconomic backdrop, and the deepening downturn in the global electronics cycle, the Singapore economy is likely to continue to face strong headwinds for the rest of the year".

The ministry flagged a host of growing economic risks including Hong Kong's political situation, the Japan-Korea trade dispute, the Sino-U.S. tariff war, slowing growth in China and Brexit.

In May, the MTI had lowered the full-year forecast for Singapore from an earlier growth prediction of 3.5% to a growth of between 1.5% and 2.5%.

The revision was announced alongside final second-quarter growth figures that showed gross domestic product contracting an annualised 3.3% from the first three months of the year, slightly better than the previous estimate of a 3.4% contraction.

The manufacturing sector contracted by 3.1 per cent year-on-year, sharper than the 0.3 per cent contraction in the previous quarter.

"We are now calling for the Monetary Authority of Singapore (MAS) to ease its monetary policy in October (On the Ground, 2 August 2019, "Singapore - Joining the dovish wave")". It is next scheduled to meet in October, where it is widely expected to ease policy.

For the second quarter this year, Singapore's gross domestic product (GDP) grew marginally by 0.1% on a year-on-year basis, similar to earlier estimates and lower than the 1.1% growth in the first quarter.

The latter was in line with the fall in Singapore's non-oil domestic exports during the quarter, especially in electronics. That comes after a 26.9% drop in electronics exports in the second quarter year-on-year.

With little sign that US-China trade row will be resolved soon, exports have been slipping across Asia and governments have slashed economic growth forecasts.

New Zealand, India and Thailand all cut interest rates last week, signalling major concerns about the outlook for economic growth.

Prime Minister Lee Hsien Loong said in his National Day message last week that Singapore is feeling the pains of the trade war, and the government is willing to stimulate the economy if needed.

"Obviously, it feels like the storm is coming if you look at the whole macro economic fundamentals softening", said Selena Ling, head of treasury and strategy at OCBC Bank, who also cited a recent round of monetary policy easing by Asian central banks.

A faltering economy is expected to crimp growth at Singapore's three local listed banks, which have so far benefited from improved margins, steady interest rates and loan growth.

Other reports by Click Lancashire

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