Singapore slashes full-year GDP forecast to 0-1% for 2019, Q2 growth the lowest in a decade

The Singapore government cut its economic growth forecast for this year on Tuesday (August 13, 2019), pegging annual growth for 2019 at between 0% and 1%, with growth predicted to come in at around the mid-point of the forecast range. The downgrade is the second time the Ministry of Trade and Industry (MTI) has trimmed Singapore’s growth expectations this year as global trade headwinds continues to plague the economy.

In May, the MTI had lowered the full-year forecast for Singapore from an earlier growth prediction of 3.5% to a growth of between 1.5% and 2.5%. Last year, the Singapore economy expanded by 3.1%.

For the second quarter this year, Singapore’s gross domestic product (GDP) grew marginally by 0.1% on a year-on-year basis, similar to earlier estimates and lower than the 1.1% growth in the first quarter.

The flat figure marks the slowest quarterly growth for the Republic since the economic downturn in mid-2009, when the economy had shrunk by 1.2%. Economists in a Bloomberg poll had been expecting for a 0.2% growth for the final data.

On a quarter-on-quarter seasonally adjusted annualised basis, the economy shrank by 3.3%, a reversal from the 3.8% growth in the previous quarter.

The weak second quarter performance makes room for a possible technical recession, which is two straight quarters of decline in economic output.

On Tuesday, the government also slashed its full-year projection for key non-oil domestic exports (NODX) to between -9% to -8% for the year, down from the range of -2% to 0% on the back of continued dismal performance in trade.

Going forward, MTI said that the GDP growth in many of Singapore’s key markets such as the United States (US) and China are expected to either slow or remain similar to the first half of this year.

GDP growth in the US is expected to moderate in the second half of the year, as the effects of the fiscal stimulus implemented in early-2018 dissipate while slowing global growth and prolonged trade uncertainty weigh on private investment.

Meanwhile, China’s growth is projected to ease further in the second half of the year on the back of weaker investment growth and a continued decline in exports, exacerbated by the increase in the US’s tariffs on its exports.

The trade tensions between the US and China has yet to be resolved, as seen by US’ recent announcement of possible tariffs on an additional US$300 billion of China imports.

Also, the risks from a “no-deal” Brexit could also lead to substantial trade frictions between the UK and its trading partners which would contribute to negative repercussions to the economic growth of UK and the European Union.

Additional concerns from Hong Kong’s unrest and the trade dispute between Japan and South Korea also add headwinds to global growth.

For the second quarter, Singapore’s manufacturing sector shrank by 3.1% from a year ago, sharper than the 0.3% contraction in the previous quarter, led by output declines in electronics, transport engineering, and precision engineering clusters.

The construction sector expanded by 2.9%, compared to the 2.8% growth in the previous quarter, helped by public sector construction works.

Services producing industries gained 1.1% year-on-year, moderating from the 1.2% growth in the previous quarter. The support came mostly from finance and insurance and information and communications segments but the wholesale and retail trade segment moderated the gains.