Economists cut Singapore growth forecast to 2.1% from 2.5%

Manufacturing expected to be a big drag as trade war escalates

Trade protectionism remains the top concern by economists who took part in the survey, with more agreeing than in March.
Trade protectionism remains the top concern by economists who took part in the survey, with more agreeing than in March.ST PHOTO: SHINTARO TAY

The trade war between the world's largest economies is taking its toll and private sector economists are now less bullish about Singapore's growth prospects than they were three months back.

They expect Singapore's economy to grow 2.1 per cent this year, down from their March forecast of 2.5 per cent growth, with manufacturing expected to act as a major drag. They now expect the sector to contract by 0.2 per cent, a far cry from their earlier prediction of 2 per cent growth.

Sectors like finance and insurance, wholesale and retail trade, and accommodation and food services are also expected to fare worse now as the trade war between China and the United States escalates.

Maybank Kim Eng economist Chua Hak Bin said: "The trade war is hurting global investment and disrupting supply chains."

He expects the tariff hike that the US has slapped on imports from China to impact the manufacturing and export sectors further.

"The trade war is also broadening to the use of export controls targeted at China tech companies (such as Huawei) and may further disrupt the tech supply chain," said Dr Chua. The slowdown from manufacturing could widen to services such as wholesale and retail trade, finance and insurance, he added.

CIMB Private Banking economist Song Seng Wun said that the falling demand for semiconductors worldwide has hit the manufacturing sector here. "There has been no big (shake-up) in the consumer electronics space... no real reasons for consumers to spend," he added.


Construction is the only sector with reason for optimism, with a growth estimate of 3.5 per cent, up from 2.1 per cent in March, according to the latest quarterly survey of professional forecasters by the Monetary Authority of Singapore released yesterday.

Dr Chua and Mr Song said that the construction sector is recovering from a long 21/2-year slump on the back of public infrastructure projects and the development of collective sale sites.

The economists' gloomier expectations follow the Ministry of Trade and Industry's predictions last month when it narrowed the growth forecast to between 1.5 per cent and 2.5 per cent, down from 1.5 per cent to 3.5 per cent.

Trade protectionism remains the top concern for economists who took part in the survey. A further slowdown in China was the next biggest worry, followed by the global downturn.

On the flip side, economists felt that an easing of trade tensions could lead to stronger-than-expected growth in Singapore.

Other potential bright spots include the strengthening tech cycle, followed by growth in China and the easing of financial conditions.

Expectations for overall inflation and core inflation dipped. Respondents expect overall inflation to come in at 0.9 per cent, down from an earlier prediction of 1.1 per cent in March. Core inflation, which strips out private transport and accommodation costs, is tipped to be 1.4 per cent, down from the previous 1.7 per cent.

A total of 22 private sector economists and analysts responded to the survey conducted last month.

A version of this article appeared in the print edition of The Straits Times on June 13, 2019, with the headline 'Economists cut S'pore growth forecast to 2.1% from 2.5%'. Subscribe