Singapore braces for slower growth in 2019

Growth is seen easing to 1.5%-3.5% in 2019 from a projected range of 3%-3.5% in 2018 says Trade Ministry

By BLOOMBERG

SINGAPORE • Trade-reliant Singapore is forecasting weaker demand from key markets in Asia next year, hurting the outlook for economic growth in the city state as the US-China tariff war starts to bite.

Growth is seen easing to 1.5%-3.5% in 2019 from a projected range of 3%-3.5% in 2018, the Ministry of Trade and Industry said in a statement yesterday.

GDP for the third quarter (3Q) disappointed, rising an annualised 3% from the 2Q and 2.2% from a year ago, lower than the government initially forecast.

As one of the most export reliant nations in Asia, Singapore’s growth prospects are closely tied to the outlook for the global economy and trade.

Authorities in the city state have been fairly upbeat this year about the growth outlook despite rising US-China trade tensions, but they expect the tariff wars to hit growth in the region.

The government said the “external demand outlook for the Singapore economy in 2019 is slightly weaker compared to 2018” and “risks to the global economy are tilted to the downside”.

Weaker growth complicates the outlook for monetary policy.

The nation’s central bank, the Monetary Authority of Singapore, has already tightened monetary policy twice this year, encouraged by the solid growth outlook.

Selena Ling, an economist at Oversea-Chinese Banking Corp in Singapore, said growth prospects for the second half of 2019 aren’t good, given the combination of rising US interest rates and a worsening trade war.

Singapore policymakers, however, face the challenge of a relatively solid labour market and a pick-up in inflation, which could prompt one more tightening move in 2019, she said.

“Growth of 2.2% year-on year in 3Q was the weakest in two years. Part of the sharp slowdown boils down to base effects, but the rest is an omen for next year, when we start to see the impact of punitive tariffs on China. So far, the slowdown in China is only due to domestic factors.

“I expect Singapore’s growth to come in the lower end of the government’s 1.5%-3.5% forecast range for 2019, unless the US backs off from its threat to lift the tariff rate on China to 25% from 10% on Jan 1,” said Tamara Henderson of Bloomberg Economics.

Separately, Singapore’s People’s Action Party will announce its new office holders today though choices for the key assistant secretary general positions have been decided upon, Today newspaper said, citing unidentified party sources.