SINGAPORE: While trade tensions between the United States and China could ease, key economists shaved more off their forecast for 2019 economic growth, the latest Monetary Authority of Singapore (MAS) survey shows.
A big downside risk is protectionism, they added.
For 2018, the economy is expected to grow by 3.3%, a tad above the 3.2% forecast made in September.
But growth is tipped to slow to 2.6% in 2019, down from the 2.7% expansion predicted previously, according to the survey findings released yesterday.
These figures show economists agree with the government’s forecast of between 3% and 3.5% growth for 2018, and slowing to between 1.5% and 3.5% next year.
The latest poll shows that rising trade protectionism remains a key concern among the 23 economists and analysts polled.
All of them, compared to 89% previously, flagged the intensification of the ongoing US-China trade conflict as a downside risk to the Singapore economy.
At the same time, more felt there was a bigger chance for trade tensions to thaw, with 47% of respondents seeing this as a potential upside compared to 37% in the September poll.
Some also felt that Singapore could benefit from the diversion of trade and investment to the region as a result of the uncertainty over US-China trade relations.
The MAS survey, however, was launched on Nov 22 before the US and China agreed on Dec 1 to a 90-day ceasefire to de-escalate trade tensions. The economists also flagged China’s economic slowdown and the tightening of global financial conditions – which would lead to higher interest rates – as downside risks to Singapore.
But if US Fed rate hikes are slower than expected, Singapore’s economy may benefit, some said.
For 2018, economists were more upbeat on the finance and insurance sector, projecting it to grow by 6.9% instead of 6.7% as predicted earlier.
Similarly, accommodation and food services sector is forecast to show a 3.4% growth compared to 2.9% previously.
They also foresee the construction industry to shrink this year at a slower pace: at 3.5% instead of 4.2% as predicted in the earlier poll.
But the outlook for manufacturing and the trade sectors is muted.
Manufacturing is expected to grow at a slower pace of 7.4%, down from 7.6%, while that for wholesale and retail trade is lowered to 1.3% from September’s 1.5%.
Households are expected to consume more goods and services, with private consumption projected to grow by 3.4% in 2018. Likewise exports, as the economists predict non-oil domestic exports to grow by 6.2%.
Headline inflation is forecast to be at 0.5% for 2018, with MAS core inflation at 1.7%. Both figures are projected to be higher next year: 1.3% for CPI-All Items and 1.8% for core inflation.
Economists maintained their forecast of unemployment rate at 2.1% for this year.
Looking at 2019, Bank of America Merrill Lynch economist Mohamed Faiz Nagutha sees a challenging year for Singapore, though a crisis is unlikely.
“As a small and open economy, Singapore will bear the brunt of any significant global slowdown but strong domestic fundamentals and policy buffers should help better navigate the challenges.
“Overall, we hold a relatively optimistic outlook for Singapore, but risks are tilted to the downside,” he said in a year-end outlook report. — Singapore Straits Times/ANN