SINGAPORE: The U.S.-China trade war and weaker global demand are clouding the outlook for Singapore’s export-reliant economy, which posted still solid growth in the first quarter.
Gross domestic product rose an annualised 3.8% from the prior quarter, higher than the government’s earlier projection of 2%, as construction rebounded. Compared to a year ago, GDP rose 1.2%.
The Ministry of Trade and Industry sees “pockets of strength” in the economy this year from the services industry, though manufacturing will see a “sharp slowdown” following two years of robust expansion. It cited the US-China trade war, weaker Chinese growth and uncertainty around the UK’s exit from the European Union as the main global risks weighing on Singapore’s outlook.
As a result, the MTI narrowed its growth forecast range for 2019 to 1.5%-2.5% from 1.5%-3.5% previously.
“The weakness in Singapore’s non-oil domestic export readings clearly paints the picture of a softer external environment,” said Jingyi Pan, a market strategist at IG Asia Pte. The growth outlook “is thus a conservative stance to take in light of the lack of clarity” around US-China trade tensions and Brexit.
The Department of Statistics has moved to a new annual chain-linked benchmarking methodology to calculate GDP, resulting in revisions of previously published data. The move is in line with United Nations’ standards and allows for the data to better reflect changes in the economy. As a result, GDP growth for 2018 was revised to 3.1% from 3.2%.
Export Slump
Exports in the trade-reliant economy have been hit by a downturn in the global tech cycle and more subdued growth in China. A report last week showed non-oil shipments plunged 10% in April from a year ago, with electronic exports contracting 16.3%. Enterprise Singapore said on Tuesday non-oil domestic exports will probably come in in a range of -2% to 0% this year.
Oxford Economics Ltd’s Sian Fenner sees the gloomy trade outlook weighing on Singapore’s growth, giving the central bank room to ease monetary policy this year, possibly at its October meeting. The Monetary Authority of Singapore, which uses the exchange rate as its main tool, left its policy stance unchanged in April.
Edward Robinson, chief economist at the MAS, told reporters Tuesday that the current policy stance was “appropriate against today’s cautious assessment of GDP growth, inflation prospects.” He said the MAS expects “a near zero output gap and inflationary pressures to be stable.”