Singapore’s government cut its forecast for economic growth this year to almost zero as the escalating US-China trade war dampens the region’s most trade-reliant economies.
Singapore’s economy now is seen growing 0.0%-1.0% this year, down from a previous projection of 1.5%-2.5%, the Ministry of Trade and Industry said on Tuesday, with growth expected to come in near the midpoint of the range.
Final second-quarter figures showed gross domestic product contracting an annualized 3.3% from the first three months of the year, versus the previous estimate of a 3.4% contraction.
“As a small and open economy, Singapore is one of the economies that feel it first,” said Selena Ling, head of treasury research and strategy at Oversea-Chinese Banking Corp. in Singapore. “We see growth being downgraded in a number of different places like Hong Kong, though it may be for different reasons. This is the trend for most of Asia at the moment.”
Singapore’s economy grew 0.1% in second quarter compared to a year ago, unchanged from the government’s previous estimate. The median estimates in a Bloomberg survey of economists were for 3.0% contraction on-quarter and 0.2% growth compared to a year ago. The Singapore dollar weakened 0.1% after the release, a day after hitting a two-year low.
The outlook for the city-state has darkened considerably in recent months as the US and China, its two biggest trading partners, continue to spar over trade. That’s raised the prospect of a recession in Singapore and possible job losses.
“Against this challenging external macroeconomic backdrop, and deepening downturn in the global electronics cycle, the Singapore economy is likely to continue to face strong headwinds for the rest of the year,” the ministry said in a statement.
Monetary policy remains unchanged and the central bank isn’t considering holding an off-cycle policy meeting, Edward Robinson, the Monetary Authority of Singapore’s deputy managing director for economic policy, said in a briefing.
Exports plunged in June to their second-worst rate since global financial crisis a decade ago. The purchasing managers index shrank in May for the first time since 2016 and has now shown contraction for three straight months, pressured by an ailing electronics sector.
Other data on Tuesday from Enterprise Singapore showed non-oil domestic exports shrank 14.6% in the second quarter from the year-earlier period as shipments of both electronic and non-electronic products declined.
“A lot of Singapore’s growth outlook has been premised on where final demand is going — and that’s expected to be much worse now, including for the regional economies,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd. in Singapore. “The cascade from the trade war could go much further than expected.”
The forecast for non-oil exports this year was revised down to -9% to -8%, from previous expectations of -2% to 0%, Enterprise Singapore said.
The downward revision to the GDP forecast “strengthens, against a dovish global environment, the case for an easing in the SGD policy this October,” DBS Bank Ltd. senior currency economist Philip Wee said, referring to the Singapore dollar.