SINGAPORE - Singapore's gross domestic product (GDP) growth in 2019 is expected to drop to 2.4 per cent "against a more challenging environment for exports and the manufacturing sector", according to a report on Monday (March 18) from the Institute of Chartered Accountants in England and Wales (ICAEW).
This is in line with easing growth across South-east Asia, as export growth slows amid increased trade protectionism and slower Chinese import demand, said ICAEW, which sees regional growth at 4.8 per cent in 2019 and 4.7 per cent in 2020, down from 5.1 per cent in 2018.
The ICAEW forecast for Singapore's 2019 growth is comparable to the Ministry of Trade and Industry's expectation of growth, coming in slightly below the mid-point of the official 1.5 to 3.5 per cent forecast range, as well as the 2.5 per cent forecast arrived at in the Monetary Authority of Singapore's March survey of professional forecasters. The Singapore economy grew 3.2 per cent in 2018.
Across the region, economies started on a soft note with a broad-based deterioration in export momentum, with only Malaysia seeing positive annual growth, said the report. While Singapore export growth improved in January, "the data is likely to be volatile in Q1 given the timing of Chinese New Year", it added.
"Looking ahead, we expect the risks to the region's economic outlook to be primarily to the downside," said ICAEW economic adviser and Oxford Economics' lead Asia economist Sian Fenner.
"A sharper slowdown in Chinese economic growth triggered by worsening confidence or a renewed escalation in US-China trade tensions would all affect global trade and growth across the region," she added.
Singapore's exposure to China means additional risks to growth, both directly to domestic demand and via supply chains, said the report. While the mildly expansionary Budget 2019 leaves room to intervene if economic conditions worsen sharply, moves such as the Bicentennial Bonus are "unlikely to lead to any significant bounce in household spending in Singapore this year".
Domestic demand is expected to moderate due to sluggish residential investment and rising headwinds facing business investment. Trade tensions may dampen private sentiment and investment intentions, while momentum in corporate profits is also forecast to soften.
Said ICAEW regional director for South-east Asia Mark Billington: "While the mildly expansionary Budget will support growth, we maintain our cautious outlook for Singapore's economy, given the slowdown in global trade and the likely impact on Singapore's manufacturing and externally-dependent service sectors."
ICAEW sees a slight acceleration in employment growth as likely to support wage growth of around 3.7 per cent, similar to 2018. Household spending momentum is expected to moderate from 2018 as higher domestic interest rates and negative wealth effects - linked to the fall in equity prices in 2018 -- reduce households' spending power.
"On a more positive note, government measures to support businesses and encourage investment, particularly in adapting to Industry 4.0, should continue to back and provide a boost to planned infrastructure investment," said ICAEW, expecting this to support investment over the next 18 months.