Singapore — The country is showing the lowest annual economic growth in almost 10 years, largely due to trade tensions between the two biggest economies in the world, the United States and China.
The two economic superpowers have been locking horns since last year, to the detriment of many countries around the world.
Singapore’s economic slowdown, as reflected in its first-quarter results, has prompted a downgrade to its full-year growth forecast, according to a Reuters report.
The country’s gross domestic product (GDP) grew by 1.2 percent year-on-year in the first three months of the year, which is slightly less than the projected 1.3 percent seen in the government’s advance estimate, as well as last year’s fourth quarter’s revised 1.3 percent pace. A Reuters news agency poll predicted a 1.5 percent growth forecast.
The first quarter results register as the slowest annual expansion for any quarter since April-June 2009. During that time, the GDP decreased by 1.7 percent from the previous year, according to data from the government.
Policymakers have already decreased their growth forecast for 2019 from 1.5 to 3.5 percent to 1.5 to 2.5 percent, mainly due to the slowdown of broad economic momentum.
Jeff Ng, the head of Asia research at Continuum Economics said that the US-China trade tensions “have already affected the sectors Singapore has relied on in the last two years.”
“The outlook is quite cloudy at the moment,” he told Reuters.
The protracted tensions between the two economic powers have been a cause of disruption to supply chains around the world and have affected business investment and corporate profits.
This has made an impact on Singapore, as well as on other nations in the region that rely heavily on trade.
Permanent secretary for trade and industry Gabriel Lim recently told the press that the slowdown in China’s economic growth, as well as the US-China trade war, would affect the country’s output and that the manufacturing sector was already feeling the effect of a decreased demand for electronics.
“With the recent trade actions announced by the US and China, there is a risk of a further escalation of the trade conflicts between the US and its key trading partners, especially China.
Should this happen and trigger a sharp fall in global business and consumer confidence, investments and consumption could decline, thereby adversely affecting global growth.”
Manufacturing performed the worst among all sectors on a quarter-on-quarter basis, as it contracted by more the 7 percent in the first quarter of the year.
He said, “Against this challenging external economic backdrop, key outward-oriented sectors in the Singapore economy are expected to slow this year.
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.”
However, the country’s construction sector actually saw an increase for the first time in ten quarters, largely due to government and private sector expansion.
Singapore has had to downgrade its forecast for non-oil domestic exports for the year as well, also because of the trade tensions that have been felt all over the globe. It has contracted by 2.0 to zero percent as shipments in the first quarter decreased by 6.4 percent on an annual basis.
Industry experts are predicting that the central bank will relax its stance on borrowing money in its next meeting in October for its semi-annual policy review.
Thus far, the central bank has said that its monetary policy stance remains unchanged after two rounds of tightening. /TISG