US President Donald Trump meets with China's President Xi Jinping at the start of their bilateral meeting at the G20 leaders summit in Osaka. Singapore’s economy has suffered from the US-China trade war. Photo: Reuters
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https://scmp.com/news/asia/southeast-asia/article/3018277/singapores-economy-shrinks-us-china-row-hits-global-trade Southeast Asia
Singapore’s economy shrinks as US-China row hits global trade ... and it’s set to get worse, analysts say
- Gross domestic product fell 3.4 per cent compared with the first three months of the year
- City state’s heavy reliance on trade and its integration in regional and global supply chains makes it vulnerable to a slowdown in world growth and tariff wars
Container cranes are pictured at the port of Singapore, whose economy contracted in the second quarter. Photo: Reuters
Singapore’s economy unexpectedly contracted in the second quarter as exports continued to plunge amid a worsening global economy.
Gross domestic product in the trade-reliant city state declined an annualised 3.4 per cent in the quarter compared with the first three months of the year. That compared with growth of 3.8 per cent in the first quarter and 0.5 per cent expansion forecast in a Bloomberg survey of economists.
Singapore’s heavy reliance on trade and its complicated integration in regional and global supply chains makes it vulnerable to a slowdown in world growth and tariff wars. Exports have already taken a big hit over the past few months, with shipments plunging in May by the most since early 2013.
“I thought the numbers would be bad, but this is ugly,” said Chua Hak Bin, an economist at Maybank Kim Eng Research in Singapore. “The whiff of a technical recession is real. We thought it might be shallow, but the risks now is that it might be deeper.”
The Singapore dollar fell as much as 0.1 per cent to 1.3588 against the US dollar after the data.
Manufacturing contracted an annualised 6 per cent in the second quarter from the previous three months. Construction declined 7.6 per cent, reversing a 13.3 per cent expansion in the first quarter. The services industry shrank 1.5 per cent in the second quarter.
But as weak as the second quarter was for the city state, the rest of the year for Singapore “will probably be much worse without a rapprochement in US-China trade relations,” said Tamara Henderson, a Bloomberg Asean economist.
“Our forecast for a 0.2 per cent year-on-year contraction in 2019 remains on course.”
Singapore’s government sees the economy expanding 1.5 per cent-2.5 per cent this year, compared with 3.1 per cent in 2018. Officials are set to revise that projection in August, Minister for Trade and Industry Chan Chun Sing told Parliament this week, adding that Singapore was “well-placed to weather the storm” given its sound economic fundamentals, strong fiscal position, and progress in restructuring the economy.
A restart to US-China trade negotiations has done little to convince economists that the global economy can skirt a slowdown through the end of 2019 and perhaps beyond. Morgan Stanley analysts last month cut both their 2019 and 2020 growth forecasts by 20 basis points each, to 3 per cent and 3.2 per cent.
Weaker economic growth may prompt the Monetary Authority of Singapore, the nation’s central bank, to keep policy unchanged in October or possibly ease. The MAS uses the exchange rate as its main tool and left policy settings steady in April.
“If by October, there is a recession and the US-China trade war still fails to find a resolution, the MAS would probably have to ease policy,” Maybank’s Chua said.