Singapore’s annual economic growth slipped to the lowest in nearly a decade in the first quarter as manufacturing contracted in the wake of a protracted US-China trade war, prompting a downgrade to the Southeast Asian country’s full-year growth forecast.
Gross domestic product (GDP) expanded 1.2 percent year-on-year in the three months ending March 31, final official data showed on Tuesday, down slightly from the 1.3 percent seen in the government’s advance estimate and the fourth quarter’s revised 1.3 percent pace.
The result, which was below the 1.5 percent growth forecast in a Reuters news agency poll, marked the slowest annual expansion for any quarter since April-June 2009, when GDP shrank 1.7 percent from a year earlier, government data shows.
As broad economic momentum cooled, policymakers downgraded their 2019 growth forecast to 1.5-2.5 percent from 1.5-3.5 percent previously.
“Uncertainty from the trade tensions [between the United States and China] have already affected the sectors Singapore has relied on in the last two years,” Jeff Ng, head of Asia research at Continuum Economics, told Reuters.
“The outlook is quite cloudy at the moment.”
Singapore, like many of its trade-reliant counterparts in the region, has been hit hard by the trade war which has disrupted global supply chains in a blow to business investment and corporate profits.
‘Challenging external economic backdrop’
Gabriel Lim, the permanent secretary for trade and industry, told a news briefing that slowing China growth and the trade dispute between Washington and Beijing were expected to weigh on Singapore’s output, while slack global demand for electronics was already hitting its manufacturing sector.
“Against this challenging external economic backdrop, key outward-oriented sectors in the Singapore economy are expected to slow this year,” Lim said.
“In particular, the electronics and precision engineering clusters … are expected to face strong headwinds on account of a sharper-than-expected downturn in the global electronics cycle, as well as uncertainties arising from the ongoing trade conflicts.”
The construction sector grew for the first time in 10 quarters on an annual basis, led by private and government sector work.
On the flip side, manufacturers bore the brunt of weakening global demand – it was the worst performing sector in the city state on a quarter-on-quarter basis, contracting 7.1 percent in the first quarter.
The deteriorating global conditions forced Singapore to also downgrade its 2019 forecast for non-oil domestic exports to a contraction of 2.0-zero percent as shipments in the first quarter shrank 6.4 percent on an annualised basis.
A central bank official said its monetary policy stance, which was kept unchanged last month after two rounds of tightening, remained appropriate.
Some economists are already betting that the central bank will be forced to make it easier to borrow money when it next meets for its semi-annual policy review in October.