Rising US-China trade tensions have slowed Singapore growth: MAS chief

The outlook for the global economy has deteriorated, said MAS managing director Ravi Menon.
The outlook for the global economy has deteriorated, said MAS managing director Ravi Menon.

Manufacturing in a downturn, with output contracting in about half of Asian economies

Escalating trade tensions between the United States and China have hit global manufacturing, trade and investment which, in turn, has slowed overall growth here, said Monetary Authority of Singapore (MAS) managing director Ravi Menon.

He said at a briefing yesterday: "We are now in the throes of a trade and technology war, and all three engines have indeed stalled."

He said the outlook for the global economy has deteriorated, with the International Monetary Fund revising its growth forecast in April to 3.3 per cent, from 3.7 per cent.

Global trade volumes fell between October and March, while investments have suffered from weakening business confidence, Mr Menon said, adding that manufacturing is in a downturn, with output contracting in about half of Asian economies, including Singapore.

"If the trade impasse between the US and China drags on and further tariff measures are imposed, growth in the second half of 2019 is likely to be weaker than earlier envisaged," he noted.

Weaker growth will affect Singapore's economic forecast for this year. Mr Menon pointed out that "the full-year forecast is premised on the economy stabilising in the third quarter of 2019, with a modest pick-up thereafter".

"But the strength of this pickup, given the softer external environment and ongoing trade conflict, is unlikely to offset the weakness in the first half."


The Trade and Industry Ministry narrowed its full-year growth forecast last month to 1.5 per cent to 2.5 per cent, from 1.5 per cent to 3.5 per cent. It did this after "taking into account the performance of the Singapore economy in the first quarter, as well as the weaker external demand outlook".

Mr Menon said growth here in the first six months is "looking to be quite weak, particularly in the trade-related sectors".

The economy grew by 1.2 per cent in the first three months of this year, compared with 4.6 per cent in the same period last year, according to a ministry statement last month.

Mr Menon's comments came as Maybank Kim Eng predicted that Singapore was headed for a shallow technical recession - two straight quarters of quarter-on-quarter contraction - in the third quarter as the global trade outlook deteriorated.

"Disruptions to the supply chain will likely intensify as the trade war broadens to tech and the US imposes export controls on more Chinese tech firms," Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye said in a note.

Mr Menon also addressed recent media assertions that Singapore is gaining from uncertainty in Hong Kong as residents protest against a controversial extradition Bill.

"We have not picked up in the data... and from our engagement with the financial institutions, no signs of any significant shift of business or funds," he said.

"Prolonged uncertainty in Hong Kong is not good for Singapore. People tend to see too much through the lens of competition. There is a lot of complementarity between the two financial centres. (The two monetary authorities) work together on many projects.

"We should not lose sight of the complementarity. If there is uncertainty that leads to poorer economic outcomes in China... that is not good for Asia... That is not good for Singapore's financial sector."

A version of this article appeared in the print edition of The Straits Times on June 28, 2019, with the headline 'Rising trade tensions have slowed S'pore growth: MAS chief'. Print Edition | Subscribe