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Singapore's 2019 GDP growth forecast to moderate to 2.4% on external headwinds

Michelle Zhu
Michelle Zhu • 2 min read
Singapore's 2019 GDP growth forecast to moderate to 2.4% on external headwinds
SINGAPORE (Mar 18): The Institute of Chartered Accountants in England and Wales (ICAEW) is expecting Singapore’s GDP growth to moderate to 2.4% in 2019 from 3.2% in the previous year, against the backdrop of a more challenging environment for exports an
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SINGAPORE (Mar 18): The Institute of Chartered Accountants in England and Wales (ICAEW) is expecting Singapore’s GDP growth to moderate to 2.4% in 2019 from 3.2% in the previous year, against the backdrop of a more challenging environment for exports and the manufacturing sector.

This is according to the institute’s latest Economic Insight: South-East Asia report, which is produced by Oxford Economics, the institute’s partner and economic forecaster.

ICAEW’s projected 2019 GDP growth figure for Singapore comes in marginally lower than the 2.5% expansion expected by professional forecasters by the Monetary Authority of Singapore (MAS) in March.

The institute is also expecting a slowing down of economic growth across the Southeast Asian region to 4.8% this year from 5.1% in 2018 – due to slower export growth amid increased trade protectionism, as well as slower Chinese import demand – before easing further to 4.7% in 2020.

In a press release on Monday, ICAEW notes that although Singapore’s mildly expansionary Budget for 2019 leaves “room to intervene” should economic conditions worsen sharply, its initiatives such as the Bicentennial Bonus for low-income individuals are unlikely to lead to any significant bounce in household spending this year.

According to the report, household spending is expected to slow down from that of 2018 as higher domestic interest rates, as well as negative wealth effects due to the fall in equity prices in 2018, will reduce overall household spending power this year.

ICAEW also expects sluggish residential investment and rising headwinds facing business investment to lead to a moderation in domestic demand this year, with corporate profit momentum to soften due to dampened private and investor sentiments due to trade protectionism.

Nonetheless, ICAEW believes Singapore’s government recent measures to support businesses and encourage investment, particularly in adapting to Industry 4.0, will continue to support investment activities over the next 18 months to come.

Moderately higher employment growth is also likely to support wage growth of around 3.7% this year, which is similar to 2018, it adds.

“Looking ahead, we expect the risks to the economic outlook of the region to be primarily to the downside. A sharper slowdown in Chinese economic growth triggered by worsening confidence or a renewed escalation in US-China trade tensions would all affect global trade and growth across the region,” says Sian Fenner, ICAEW economic advisor and lead Asia economist for Oxford Economics.

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