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Singapore Braces for Slower Growth in 2019 as Trade War Hits

Bloomberg logoBloomberg 11/22/2018 Michelle Jamrisko

(Bloomberg) -- Trade-reliant Singapore is forecasting weaker demand from key markets in Asia next year, hurting the outlook for economic growth in the city state as the U.S-China tariff war starts to bite.

Growth is seen easing to 1.5 percent to 3.5 percent in 2019 from a projected range of 3 percent to 3.5 percent in 2018, the Ministry of Trade and Industry said in a statement on Thursday. Gross domestic product for the third quarter disappointed, rising an annualized 3 percent from the second quarter and 2.2 percent from a year ago, lower than the government initially forecast.

a circuit board: Singapore is bracing for weaker economic growth© Bloomberg Singapore is bracing for weaker economic growth

Key Insights

As one of the most export-reliant nations in Asia, Singapore’s growth prospects are closely tied to the outlook for the global economy and trade. Authorities in the city state have been fairly upbeat this year about the growth outlook despite rising U.S.-China trade tensions, but they expect the tariff wars to hit growth in the regionThe government said the “external demand outlook for the Singapore economy in 2019 is slightly weaker as compared to 2018” and “risks to the global economy are tilted to the downside”Weaker growth complicates the outlook for monetary policy. The nation’s central bank, the Monetary Authority of Singapore, has already tightened monetary policy twice this year, encouraged by the solid growth outlook Selena Ling, an economist at Oversea-Chinese Banking Corp. in Singapore, said growth prospects for the second half of 2019 aren’t good, given the combination of rising U.S. interest rates and a worsening trade war. Singapore policy makers, however, face the challenge of a relatively solid labor market and a pick-up in inflation, which could prompt one more tightening move in 2019, she said

What Our Economists Say...

“Growth of 2.2% y/y in 3Q was the weakest in two years. Part of the sharp slowdown boils down to base effects, but the rest is an omen for next year, when we start to see the impact of punitive tariffs on China. So far the slowdown in China is only due to domestic factors. I expect Singapore’s growth to come in the lower end of the government’s 1.5-3.5% forecast range for 2019, unless the U.S. backs off from its threat to lift the tariff rate on China to 25% from 10% on Jan. 1.”

-- Tamara Henderson, Bloomberg Economics

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Here’s a table that shows the performance of key sectors: Singapore’s Third Quarter GDP Rise 2.2% Y/y (Table)Capital Economics cut its 2019 growth forecast to 2 percent from 2.5 percent after the dataIn a separate report, Enterprise Singapore raised its projection for non-oil export growth for this year to a range of 5.5 percent to 6 percent, and forecast expansion would be flat to 2 percent for next yearThis table shows how exports to China have plummeted this year: Singapore Oct. Non-Oil Exports to China -25.8% Y/y; By Country

(Updates with comment from economist.)

--With assistance from Ailing Tan and Myungshin Cho.

To contact the reporter on this story: Michelle Jamrisko in Singapore at

To contact the editors responsible for this story: Nasreen Seria at, Karl Lester M. Yap

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