Singapore’s US-China trade war exposure laid bare in scathing economic review

This year’s growth forecasts for the Lion City have been downgraded from 2.1 per cent to 0.6 per cent, with 2020s also expected to be reduced

In a poll of economists, 88.9 per cent said ‘trade tensions escalating’ was the biggest risk facing the city’s economy, followed by the slowdown in China

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Singapore is the second most trade-dependent nation in the world after Luxembourg and is viewed as an early indicator of ruptures in the global economy. Photo: AFP

Published: 12:51pm, 4 Sep 2019Updated: 10:28pm, 4 Sep 2019

The trade war between the United States and China will continue to hammer Singapore’s economy this year and severely disrupt it into 2020, according to a new report which laid bare the city state’s exposure to the escalating dispute.

As a measure of how the tit-for-tat tariff battle between the world’s two largest economies has sent shock waves through Asia’s exporting economies, this year’s growth forecasts for Singapore have already been downgraded sharply from 2.1 per cent to 0.6 per cent.

Next year’s growth rate for the city will be 1.6 per cent, economists said, down from their previous estimate of up to 2.4 per cent made in June, with the analysts united in their view that the trade war is the chief cause of Singapore’s economic woes.

This piece of uncomfortable reading for Lion City policymakers came after the Singapore Monetary Authority, the city state’s central bank, polled 27 economists on the state of the economy.

The 2020 growth figure could also be fanciful should US-China relations deteriorate further, with 88.9 per cent of those polled saying that “trade tensions escalating” was the biggest risk facing the Singapore economy, followed by the domestic economic slowdown in China – Singapore’s largest trading partner – at 50.0 per cent.

Rounding off the top three risks, 38.9 per cent thought “geopolitics” was a potential hazard to Singapore, emphasising how vulnerable it is to events such as the ongoing anti-government protests in Hong Kong – the second largest buyer of Singaporean goods. The volatile situation in the Persian Gulf is also weighing on Singapore, with 5 per cent of its economy dependent on oil given the city’s role as a refining, re-export, pricing and trading hub.