Singapore’s economy expanded at a much slower pace than initially thought in the third quarter, with the government flagging a further moderation in the current quarter and 2019 in part due to the US-Sino trade war.
The prosperous city-state is seen as a bellwether for global growth because international trade dwarfs its domestic economy, equating to about 200 per cent of its GDP. Global markets have suffered a shakeout in the past two months as trade tensions fanned worries about a slowdown in world trade, business investment and growth.
The economy grew 3.0 per cent in the July-September quarter from the previous three months on an annualized and seasonally adjusted basis, revised final figures from Ministry of Trade and Industry (MTI) showed on Thursday. The government’s initial estimate, released on October 12, had showed the economy grew 4.7 per cent.
Gross domestic product grew 2.2 per cent in the third quarter from the year earlier, slower than the advance estimate of 2.6 per cent growth.
The median of 11 analysts in a Reuters poll predicted a 4.2 per cent rise quarter-on-quarter and a 2.4 per cent rise on a year-on-year basis.
The MTI revised its forecast for GDP growth for 2018 to 3.0 to 3.5 per cent, from 2.5 to 3.5 per cent previously. It gave a wide range for 2019’s GDP growth forecast of between 1.5 to 3.5 per cent.
“The external demand outlook for the Singapore economy in 2019 is slightly weaker as compared to 2018. At the same time, risks in the global economy are tilted to the downside,” Loh Khum Yean, permanent secretary for trade and industry said.
“There is the risk of a further escalation of the ongoing trade conflicts between the US and its key trading partners, which could trigger a sharp fall in global business and consumer confidence.”
Singapore’s central bank has warned that a heated trade war between the United States and China – one of the city state’s major trade partners – could hurt the domestic economy.
Export growth to China has slowed for 5 months in a row, raising worries about the outlook as the Sino-US trade tensions showed no signs of abating.
A Singapore central bank official told reporters at a news briefing following the data release that the inflation and monetary policy outlook remains unchanged. The Monetary Authority of Singapore has tightened policy at both of its semi-annual meetings this year, most recently in October.
Jeff Ng, an economist with Continuum Economics, said he did not expect the softer growth to derail the MAS’ tightening cycle, adding he expected a further tightening at the central bank’s next scheduled policy announcement in April.