SINGAPORE: Singapore’s government revised down its forecast for economic growth this year to almost zero amid an escalating trade war and global downturn.
The city state’s economy is seen growing 0%-1% this year, down from a previous projection of 1.5%-2.5%, the Ministry of Trade and Industry said in a statement Tuesday, with growth expected to come in near the midpoint of the range.
The revision was announced alongside final second-quarter growth figures that showed gross domestic product contracting an annualised 3.3% from the first three months of the year, slightly better than the previous estimate of a 3.4% contraction.
Compared to a year ago, the economy expanded 0.1% in the second quarter, unchanged from the government’s previous estimate. The median estimates in a Bloomberg survey of economists was for 3% contraction on-quarter and 0.2% growth compared to a year ago.
“Against this challenging external macroeconomic backdrop, and the 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 Tuesday.
Singapore’s outlook has darkened considerably in recent months as the US and China, the city state’s two biggest trading partners, continue to spar over trade. That’s raised the prospect of a recession in Singapore and possible job losses.
The Monetary Authority of Singapore said monetary policy remains unchanged and it’s not considering holding an off-cycle policy meeting, Edward Robinson, MAS deputy managing director for economic policy, said in a briefing.
Prime Minister Lee Hsien Loong said in his National Day message last week that Singapore is feeling the pains of the trade war, and the government is willing to stimulate the economy if needed.
“Singapore looks to be going into full-brace mode. It’s a very sobering realisation that growth is going to be a lot lower going forward; they’re looking at sub-1% at this stage,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd in Singapore.
“If the outlook for trade is going to be a lot gloomier – along with oil taking a hit and issues in the tech sector – any upside in volatility will be bad for Singapore.”
Exports plunged in June to their second-worst rate since the global financial crisis a decade ago.
The purchasing manager’s 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 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.