Singapore economy may feel negative impact from US-China trade war: MAS

The impact of trade frictions on global trade and production, as well as the region’s export and Gross Domestic Product (GDP) growth, is likely to become more evident in the second half of the year, MAS said.

“Trade frictions between some major economies and the resulting uncertainty could weigh more discernibly on economic activity, although some of this could be mitigated by the diversion of trade flows and production to Southeast Asia,” it added.

The waning IT cycle and moderating trade-related industries will contribute to a slower but “firm” pace of expansion for the Singapore economy for the rest of this year and for 2019, the central bank said. Growth in modern services is expected to remain firm, benefiting segments such as IT & information and consulting services, as well as the financial sector.

GDP is expected to come in at the upper half of the 2.5-3.5% forecast range for 2018, before moderating slightly next year.

Singapore’s GDP was up 4.1% for the second quarter and 2.6% for the third quarter this year, on a year-on-year basis.

Global growth predictions for 2019 lower than this year

Growing trade frictions between the US and China, as well as a concurrent tightening of global financial conditions, could increasingly weigh down on economic activity for other economies.

Further hikes in US interest rates and the Federal Reserve’s gradual unwinding of its balance sheet could also lead to a tightening of dollar liquidity, posing debt rollover risks for some borrowers in emerging markets.

The central bank has projected global growth for next year to expand by 4.2%, slower that this year’s 4.4% increase.

For the G3 economies – US, Japan, Eurozone – GDP is expected to grow by 2.0% for next year, compared to 2.2% for this year. China is predicted to grow by 6.6% for this year, before slowing down to 6.3% for next year.