Singapore's economy grew by 2.6 per cent in the third quarter - slowing down considerably after a strong showing in the first half of the year, according to flash estimates released yesterday by the Ministry of Trade and Industry (MTI).
The manufacturing sector, which has been the main engine of recent growth, also finally appeared to lose steam.
While the fundamentals seemed in good shape, and the figure was within MTI's forecast range of 2.5 per cent to 3.5 per cent growth for 2018, there are concerns that a full-fledged trade war between the United States and China could hit Singapore badly.
The country's gross domestic product (GDP) grew by 4.6 per cent year on year in the first quarter, and 4.1 per cent in the second, before the latest slowdown hit.
Manufacturing, which makes up a fifth of the economy, grew 4.5 per cent year on year in the third quarter, well short of the double-digit growth in the first half of the year.
Some economists now predict that the slowdown in the manufacturing industry is likely to continue for some time.
"Singapore's manufacturers, particularly those in the semiconductor segment, are already experiencing slowing growth due to the maturing of the global electronics cycle, and business sentiment is likely to be further dampened by rising trade tensions," said a report by Fitch Solutions Macro Research.
Things will not get any easier, with the Singdollar likely to ap-preciate after the Monetary Authority of Singapore announced yesterday that it would tighten its monetary policy.
The stronger currency, while controlling imported inflation, could hit Singapore's exports if they become more expensive for its trading partners, said SIM Global Education senior lecturer Tan Khay Boon.
Meanwhile, an even bigger concern looms. "With the trade dispute between the US and China not likely to abate in the next few months, the manufacturing sector's performance is likely to encounter more downward pressure," said Dr Tan.
However, some economists said the impact of the US-China trade tensions may be felt only later, depending on when they fully erupt.
OCBC Bank, for example, stuck to its 2019 growth forecast of 2.7 per cent, but with a caveat that it could hit a lower range of 2.2 per cent if the US were to escalate the trade war by imposing tariffs on all US$505 billion (S$695.6 billion) worth of Chinese goods it imports.
Meanwhile, some hope that other industries will step up to become growth drivers.
The service industries - the biggest contributor to GDP - grew by 2.9 per cent, matching growth in the last quarter.
"A strong showing in the service cluster will be useful in supporting growth amid the normalisation in the manufacturing cycle," said DBS senior economist Irvin Seah.
The construction sector shrank by 3.1 per cent year on year in the latest estimates, though this was an improvement on the 4.2 per cent decline seen in the second quarter.
Some, like Mr Seah and CIMB Private Bank economist Song Seng Wun, said the 1.7 per cent quarter-on-quarter growth of the construction industry shows the worst is over for it. Others disagree, pointing to the likely effect of recent property cooling measures on construction demand.
While the latest GDP growth figures showed a drop, some had expected even bleaker numbers, and three commercial banks - DBS, OCBC and United Overseas Bank - marginally raised their 2018 forecasts to between 3.3 per cent and 3.4 per cent, showing they are positive on the economy, at least for this year.
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