Singapore economy is in for a rough ride as US-China trade war stings

The city state's central bank is reviewing its forecast as it expects year-on-year economic growth to be weaker in the second quarter

A slump in exports has hit manufacturing, which contracted more than expected in May, the latest data shows

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Singapore’s economy is expected to grow at its slowest pace in a decade this year, and some are predicting a recession in 2020, with the hi-tech manufacturing hub more vulnerable to the trade war than others in Southeast Asia. Photo: Handout

Published: 1:03pm, 27 Jun 2019Updated: 10:28pm, 27 Jun 2019

Singapore’s central bank is reviewing its 1.5-2.5 per cent economic growth forecast for this year and can’t rule out off-cycle monetary easing as the US-China trade war hits the city state’s exports, central bank chief Ravi Menon said on Thursday.

Singapore’s economy is expected to grow at its slowest pace in a decade this year, and some are predicting a recession in 2020, with the hi-tech manufacturing hub more vulnerable to the trade war than others in Southeast Asia.

The Monetary Authority of Singapore (MAS) expects year-on-year economic growth to be weaker in the second quarter than a decade-low 1.2 per cent achieved in the first quarter due to a global slowdown partly caused by trade tensions, Menon said.

“The Singapore economy is in for a rougher ride but is well placed,” Menon said in a speech that accompanied the release of the central bank’s annual report. “We need to be alert but there is no need to be alarmed.”

The MAS will wait for second quarter growth numbers in July before finalising any revision to its full-year forecast, said Ed Robinson, deputy managing director for economic policy.

Thailand’s central bank cut its 2019 economic growth forecast on Wednesday, but held interest rates.

A raft of bleak data has prompted economists to raise bets of monetary easing at the MAS’ next semi-annual policy meeting in October, or even earlier if the global growth outlook dims and the US Federal Reserve cuts interest rates. Menon said current monetary policy was appropriate but nothing was off the table.

“There are a whole lot of new factors on the horizon that we are very carefully studying,” he said. “Of course analysts will come up with a range of possibilities and I wouldn’t rule any of them out at this point.”