Dampening global trade is likely to hit Singapore next year amid increasing risks from a new wave of protectionism, according to a report out yesterday.
The economy is expected to expand at a "subdued pace" next year, with gross domestic product growth at 2 per cent - up slightly on the 1.4 per cent forecast for this year, said the Institute of Chartered Accountants in England and Wales (ICAEW).
But prospects remain optimistic, with growth tipped to accelerate to 3.5 per cent in 2018 as global trade gradually improves, noted the report, which was produced by ICAEW's partner and economic forecaster Oxford Economics.
"In order to raise its competitiveness and sustain its growth trajectory, Singapore has to fix a number of structural challenges associated with a loss of competitiveness among some key manufacturing sectors which might otherwise dampen growth over the coming years," said Ms Priyanka Kishore, ICAEW economic adviser and Oxford Economics lead economist.
"The adjustment in property prices is also a risk worth monitoring - banks look well-capitalised and there seems little chance of a financial crisis, but a prolonged spell of falling property prices could slow growth, which will impact household wealth."
The report noted that the economic outlook for Asean as a whole remains "reasonably positive" despite the global economic and political volatility.
Recent data has pointed to a pick-up in trade for several economies, including Singapore, while Asean central banks may be able to ease policy to support growth.
ICAEW said the key external risk to regional growth in the next couple of years is the potential for a slowdown in credit growth in China.
"This would weaken global demand for raw materials, key exports for Indonesia and Malaysia. Additionally, China's demand for goods imported from Vietnam would suffer, as would Chinese tourist flows to Thailand, and Singapore's activity as a transport and logistics hub for all of the above sectors."
Asean economies are also vulnerable to a more generalised slowdown in globalisation or an erosion of the consensus in favour of free trade, although the region is quite insulated from the effects of a "messy Brexit" in the United Kingdom.
The report said data shows Asean does relatively well on measures of political, economic, exchange rate and credit rating risks compared to other major emerging markets.
Singapore scores well in terms of economic and financial risk, which bodes well for sustaining growth.
Mr Mark Billington, regional director for ICAEW South-east Asia, said: "Deals like the Trans-Pacific Partnership are important not only for their potential to directly boost trade and investment flows, but also to help embed good business practice in signatory countries.
"If momentum towards deals' ratification seems to be slowing, governments and businesses should look at alternative measures."
The report is a quarterly review of South-east Asian economies.