Singapore to see sharpest slowdown in S-E Asia, says report

Export-dependent nation likely to be worst hit by US-China trade war: Accounting body

Singapore is expected to experience the sharpest economic slowdown in South-east Asia, with gross domestic product (GDP) growth slowing from 3.1 per cent last year to 1.9 per cent this year, as its export outlook deteriorates following more tariff hikes from the US and China, said the Institute of Chartered Accountants in England and Wales (ICAEW) yesterday.

"As a small and open economy that is heavily dependent on exports, Singapore's growth will likely be the most negatively affected," it said in a report.

Mr Mark Billington, ICAEW's regional director for Greater China and South-east Asia, added: "Renewed trade tensions between the United States and China come at a time when export growth across the region is already facing a difficult external environment. With its links to China and dependence on exports, we expect Singapore to experience the sharpest slowdown in GDP growth across the region, with its economy likely to dip into recession in 2020, should external conditions further deteriorate."

This is in tandem with its forecast that economic growth in South-east Asia is expected to decelerate on the back of weaker Chinese import demand, a slowdown in the global ICT (information and communications technology) cycle, and an increase in trade protectionism over the past year.

Regional growth is expected to slow from 5.3 per cent last year to 4.8 per cent this year, before moderating to 4.7 per cent next year, amid slowing global trade and escalating US-China trade tensions.

Ms Sian Fenner, ICAEW's economic adviser and Oxford Economics lead Asia economist, said: "We expect exports and overall economic growth to continue to come under further pressure, as the re-escalation of trade tensions between US and China is unlikely to ease any time soon.

"With export volumes already on the downside since the start of the year, any further increase in trade tensions between the world's two largest economies will likely see a much more prominent slowdown in regional growth."

Regional growth is expected to slow from 5.3 per cent last year to 4.8 per cent this year, before moderating to 4.7 per cent next year, amid slowing global trade and escalating US-China trade tensions.

Singapore's economy grew 1.2 per cent in the first quarter this year - the lowest growth rate in almost 10 years. This was a tad lower than the Government's initial estimate of 1.3 per cent, and down from the previous quarter's results, which were revised downwards from 1.9 per cent to 1.3 per cent. First-quarter GDP growth also came in below economist expectations of 1.5 per cent.

While sequential growth was up by 0.9 per cent quarter on quarter, the details were mixed, the report highlighted. Household spending remained resilient and non-residential and infrastructure construction was strong, even though growth eased and demand for durable goods, such as motor vehicles, was particularly weak.

The report added that against the backdrop of a more challenging export outlook and benign inflationary pressures, the Monetary Authority of Singapore is likely to remove some of last year's appreciation bias in its S$Neer (Singapore dollar nominal effective exchange rate), which is a trade-weighted basket of currencies against the Singapore dollar.

"As such, the USD/SGD is expected to end 2019 at around 1.37, which is consistent with the Singapore dollar moving towards the centre of its policy band," it said.

The ICAEW's forecast for Singapore's 2019 growth is within the range of the Ministry of Trade and Industry's expectation for GDP growth to come in at 1.5 per cent to 2.5 per cent this year, compared with the previously estimated 1.5 per cent to 3.5 per cent range.

A version of this article appeared in the print edition of The Straits Times on June 05, 2019, with the headline 'Singapore to see sharpest slowdown in S-E Asia, says report'. Print Edition | Subscribe