IMF cuts Singapore growth forecast amid trade tensions
The International Monetary Fund has lowered its growth forecast for Singapore, citing rising global trade tensions, just days after the city-state reported its worst quarterly economic performance in a decade.
In the findings of a consultation published on Tuesday, the IMF said that it expected the south-east Asian economy would now only grow by 2 per cent this year, down from a previous forecast issued in May that anticipated 2.3 per cent growth in 2019.
The IMF said that it expected an increase in global trade tensions to weigh on the economy, which is reliant on exports of manufactured goods and electronics.
“Given global trade tensions, support from external sectors is expected to fall and growth drivers are projected to shift back to domestic demand,” the IMF wrote.
Singapore last week said that its economy experienced its slowest rate of growth in a decade in the second quarter, raising fears that the slowing global outlook and trade tensions are weighing on Asian economies. During the period the Singaporean economy grew by just 0.1 per cent year on year, far below expectations, as it was dragged down by a slowdown in its manufacturing sector.
The country’s dependence on high-tech exports has made it particularly vulnerable to trade tensions, which have disrupted supply chains across Asia.
Chua Hak Bin, an economist at Maybank Kim Eng, said last week that Singapore, “being very open to trade”, was “the canary in the coal mine” for Asia’s regional economy.
Singapore’s government in May said that it expects its economy to grow between 1.5 per cent and 2.5 per cent this year, but analysts suspect this forecast could get downgraded.
However, the IMF in its report on Tuesday said “investment is expected to pick up on digitalisation” and as businesses adopt new technologies.
“Over the medium term, growth should stabilize around 2.5 per cent, increasingly driven by modern services alongside other trade-related sectors,” it added, but warned that risks to its outlook “are tilted to the downside”.