Singapore to review 2019 growth forecast as trade war bites; weaker Q2 expected: MAS

MAS expects year-on-year economic growth to be weaker in the second quarter than a decade-low 1.2 per cent achieved in the first quarter.
MAS expects year-on-year economic growth to be weaker in the second quarter than a decade-low 1.2 per cent achieved in the first quarter.PHOTO: REUTERS

SINGAPORE (REUTERS, BLOOMBERG) - Singapore policymakers will review a 1.5 to 2.5 per cent economic growth forecast for this year as the United States-China trade war hits investments, trade and manufacturing in the city, central bank chief Ravi Menon said on Thursday (June 27).

The Monetary Authority of Singapore (MAS) expects year-on-year economic growth to be weaker in the second quarter than a decade-low 1.2 per cent achieved in the first quarter due to a global slowdown partly caused by trade tensions, Mr Menon said.

"The Singapore economy is in for a rougher ride but is well placed," Mr Menon said in a speech that accompanied the release of the central bank's annual report.

"We need to be alert but there is no need to be alarmed."

The review of Singapore's economic growth forecast comes after Maybank Kim Eng Research said earlier that the country's economy will probably experience a "shallow technical recession" in the third quarter as the global trade outlook worsens.

The escalating US-China trade conflict is weighing on Singapore's export-reliant economy, which Maybank expects will grow 1.3 per cent this year, down from a previous projection of 1.6 per cent and lower than the Government's forecast range of 1.5 to 2.5 per cent.

"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 economists Chua Hak Bin and Lee Ju Ye said in a note.

 
 
 
 

The slump in exports has hit manufacturing, which contracted more than expected in May, data on Wednesday showed. The outlook for electronics, which make up 27 per cent of factory output, is particularly weak since US export controls may hit chipmakers like Broadcom Inc and Intel Corp, which operate in Singapore, Maybank said.

A recession is defined as two consecutive quarters of negative quarter-on-quarter growth, and if that happens, it will increase the chance of the central bank easing monetary policy in October, the economists said. The MAS, which uses the exchange rate as its main tool, left its policy settings unchanged in April.

MAS and the Ministry of Trade and Industry, which are reviewing their growth forecast range for the year, could not yet say whether it will be revised to even lower than the current 1.5 to 2.5 per cent estimate, Mr Menon told reporters during the Thursday release of the central bank's annual report.

A fresh figure will have to wait at least until second-quarter economic data are fully collected through July, Mr Edward Robinson, MAS' chief economist, said at the same event.