Economists fret over trade tensions, shave forecast for Singapore growth in 2019

PRIVATE economists unanimously fingered higher US-China trade tensions as a downside risk to Singapore's growth, as they dialled down their forecast for 2019 in a recent industry poll.

Economists expect Singapore's gross domestic product (GDP) growth to ease to 2.6 per cent in 2019, from an estimated 3.3 per cent in 2018, according to results out on Wednesday from a quarterly survey by the Monetary Authority of Singapore (MAS).

They had previously projected in September's poll that the national GDP would notch 3.2 per cent growth in 2018 and 2.7 per cent in 2019.

The subdued showing is expected to come on the back of a marked slowdown in manufacturing growth - from an estimated 7.4 per cent in 2018, to just 3 per cent in 2019 - and cooling growth in the finance and insurance sector, from 6.9 per cent in 2018 to 5.4 per cent in 2019.

The weakness is expected to extend to the accommodation and food services sector, where growth could ease from 3.4 per cent in 2018 to 2.8 per cent in 2019.

Such declines would offset the anticipated improvement in wholesale and retail trade - with growth expected to pick up from 1.3 per cent in 2018 to 1.7 per cent in 2019 - and a turnaround in the construction sector, which could go from a year-on-year contraction of 3.5 per cent in 2018 to an expansion of 1.5 per cent in 2019.

Growth in non-oil domestic exports is expected to fall by more than half, from 6.2 per cent in 2018 to 2.9 per cent in 2019.

Headline inflation was predicted to come in at 0.5 per cent for 2018, in line with official estimates, as private economists moved their forecast down from September's 0.7 per cent.

They also trimmed their expectations for 2019's headline inflation numbers, to a forecast of 1.3 per cent, from the 1.5 per cent that was anticipated in September.

The downgrade came on the back of an expected moderation in private consumption, from 3.4 per cent growth in 2018 to 3.1 per cent in 2019.

Estimates for core inflation - an MAS indicator that strips out private transport and housing costs - were kept intact at 1.7 per cent for 2018 and 1.8 per cent for 2019.

Meanwhile, trade protectionism was seen as the top risk to the economy by far - picked by all of the survey's respondents, against 89 per cent of them in September - even as the share of watchers concerned by rising interest rates and a slowdown in China also edged up to 41 per cent of respondents, from 37 per cent in the previous survey.

"A growing number of respondents flagged slower growth in China as a downside risk, on the back of tightening credit conditions," said the MAS in its summary of the survey results.

"Faster than expected US interest rate hikes, which could trigger financial market turbulence, also continue to be a downside risk for a number of respondents."

But, on the bright side, cooling trade tensions could lift the growth outlook, said 47 per cent of respondents, up from 37 per cent in September.

Slower-than-expected monetary tightening in the US, as well as potential benefits from the diversion of trade and investment out of China and into the region, also appeared on the list of top three upside possibilities - both cited by 29 per cent of respondents.

The central bank's December survey, which was sent out on Nov 22, netted replies from 23 economists who track the Singapore economy. It does not represent the MAS's views or forecasts.