SINGAPORE, June 27 — The ongoing tension between the United States and China has stalled three of the world’s growth engines — trade, manufacturing and investments — which means the Singapore economy is likely to end the year weaker than earlier expected, warned Monetary Authority of Singapore (MAS) managing director Ravi Menon today. He also said that the Ministry of Trade and Industry and the MAS are reviewing the 1.5 to 2.5 per cent GDP growth forecast for this year — which was just slashed last month from the initial forecast range of 1.5 to 3.5 per cent.
Nevertheless, Ravi stressed that the global economy is "not headed for a crash", as it is supported by healthy private consumption in Asia and other major economies and a resilient services sector worldwide.
In a grim assessment of the current economic situation, Menon, who was speaking at a media briefing on the MAS’ annual report, noted that global manufacturing is in a “synchronised downturn”, global trade volumes have declined for two straight quarters and global investments have suffered from weakening business confidence.
“If the trade impasse between the US and China drags on and further tariff measures are imposed, growth in the second half of 2019 is likely to be weaker than earlier envisaged,” he said.
The impact of the trade conflict will be felt across Asia through disruptions in supply chains, a slowdown in China — which would have significant spillover effects on the rest of Asia — and firms holding back on their expansion plans, he added.
Amid this backdrop, Ravi said Singapore’s gross domestic product (GDP) growth for the year is likely to be weaker than earlier forecast.
The present forecast of 1.5 per cent to 2.5 per cent growth hinges on the economy stabilising in the third quarter of the year and a modest pick-up thereafter, he said.
But he added that these are unlikely to offset the weakness seen in the first half of the year.
Still, he noted that it is important to look beyond the headline numbers and study the composition of growth in the domestic economy.
Last year, he said, Singapore’s economic growth was driven by trade and modern services, while the domestic services sector was flat.
This year, while trade is decelerating, modern services is holding up, while the domestic services sector is gradually recovering.
Ultimately, he said, the Singapore economy is in for a “rougher ride” but it is well placed to do so. “We need to be alert but there is no need to be alarmed,” he added. — TODAY
