Trade protectionism, China economy seen as increasingly risky to Singapore's GDP growth

Trade protectionism, China economy seen as increasingly risky to Singapore's GDP growth

Michelle Zhu
05/09/18, 12:00 pm

SINGAPORE (Sept 5): The Singapore economy is forecast to expand by 3.2% this year before growth eases to 2.7% in 2019, according to the latest survey of economists and analysts conducted by the Monetary Authority of Singapore (MAS).

Both full-year forecasts remain unchanged from the previous month’s survey, whose mean probability distribution reflected that the most likely outcome is for Singapore’s gross domestic product (GDP) to grow between 3-3.4% this year and within the range of 2.5-2.9% in the next year.

This comes after Singapore’s GDP expanded by 3.9% in 2Q18 compared with the same period last year, similar to the median forecast reported in MAS’s June survey.

In its Sept 2018 survey, MAS found that respondents assigned a 39.2% probability to their forecasted 2018 range, down 41.9% in the June survey, alongside an increase in the average probability assigned to the 3.5-3.9% range.

3Q y-o-y GDP growth is expected to come in at 2.1%, with CPI-all items inflation and MAS core inflation for the same period projected to come in at 0.8% and 1.9%, respectively.

The median CPI-all items inflation for 2018 as a whole is forecast to be 0.7%, which is down from 0.8% in the June survey. Meanwhile, the forecast for MAS core inflation this month rises to 1.7% from 1.6% previously.

On average, higher probabilities have been assigned to the ranges of 0.5-0.9% for 2018 CPI-all items inflation and 1.5-1.9% for MAS core inflation, respectively, in the latest survey.

Respondents expect the unemployment rate to come in at 2.1% by end-2018, unchanged from the previous survey.  

Going forward, CPI-all items inflation is projected to fall within the 1%-1.9% range in 2019, while MAS core inflation is expected to come in at 1.5-1.9%.

In its MAS Survey of Professional Forecasters: September 2018 report, MAS says its respondents have most commonly identified external growth, driven mainly by better performance in the US, as an upside risk for their views on the Singapore economy.

In contrast, a less-optimistic outlook of the domestic property market partly due to recent property cooling measures were identified as the most common downside risk, although 37% of all respondents believed the dissipation of trade tensions would remove uncertainty from the forecast horizon.

Trade protectionism nonetheless continues to weigh on the minds of 89% of the 23 respondents to the survey, with further escalation of trade rhetoric by the US and its trading partners, as well as the implementation of announced tariffs, causing concern.

MAS notes that a growing number of respondents have cited slower growth in China on the back of tightening credit conditions as a downside risk. While faster-than-expected rate hikes by the US Federal Reserve (Fed) continues to be a downside risk for a number of respondents, the proportion has fallen to 37% from 47% in the previous survey.

The authority also observes that an increasing number of respondents have flagged risks of weaker external growth in its recent survey, in line with tightening liquidity conditions in emerging markets (EMs).

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