Singapore GDP growth to slow to 1.9% in 2019: ICAEW

Singapore

IN LIGHT of renewed US-China trade tensions, South-east Asia is expected to see a greater slowdown in economic growth, with Singapore being "most negatively affected and would likely dip into recession in 2020".

This is according to the Institute of Chartered Accountants in England and Wales (ICAEW), in a report on Tuesday.

As a small, open economy heavily dependent on exports, the report noted that Singapore is expected to experience the sharpest slowdown in the region.

The country's gross domestic product (GDP) growth in 2019 is expected to moderate to 1.9 per cent from 3.1 per cent in 2018, before rising to a below-trend rate of 2.2 per cent in 2020.

"We expect exports and overall economic growth to continue to come under further pressure, as the re-escalation of trade tensions between US and China is unlikely to ease any time soon,'' said Sian Fenner, ICAEW economic adviser and Oxford Economics' lead Asia economist.

The outlook for the Singapore economy, however, is not all doom and gloom.

Household spending remained resilient, and non-residential and infrastructure construction saw positive growth for the first time in two and a half years in the first quarter.

Furthermore, the labour market in Singapore is "still quite healthy", Ms Fenner added.

Meanwhile, GDP growth across South-east Asia in 2019 is predicted to slow to 4.8 per cent from 5.3 per cent in 2018, before moderating to 4.7 per cent in 2020.

"This slowdown in growth reflects the weaker global trade environment, as well as the uncertainties on external demand, and how this will impact investment decisions,'' said Ms Fenner.

The report added that export momentum across the region has continued to deteriorate into the second quarter, owing to weaker Chinese import demand, a slowdown in the global information and communication technologies cycle, as well as the increase in trade protectionism over the past year.

With the recent escalation of US-China trade tensions now coming into play, exports and overall economic growth in South-east Asia will likely see a much more prominent slowdown.

While the rest of the Asean economies have recorded sharp falls in exports, Vietnam is bucking the trend, with merchandise exports being 10.4 per cent higher than a year ago in April.

Overall, Vietnam's GDP is expected to grow by 6.7 per cent in 2019, placing it as the fastest growing economy in the region.

In conjunction with the report's launch event on Tuesday was a panel discussion on finance infrastructure and the Belt and Road Initiative (BRI).

Launched in 2013 by China, the BRI aims to build infrastructure such as roads and ports connecting more than 130 countries across Asia, Africa and Europe. The project is expected to cover around 60 per cent of the world's population and about 30 per cent of global GDP.

Ernest Kan, the chief adviser of Capital Markets China at Singapore Exchange Limited, pointed out that Italy signed on to the BRI months ago in March - making it the first G7 country in the BRI.

He said: "The BRI has evolved... it is international, a lot more inclusive, and we are expecting a second G7 country, likely from Asia, to sign on."

On the BRI's impact in South-east Asia, Ms Fenner pointed out that the initiative can play a role in ''plugging the infrastructural gap'' in countries like Indonesia and the Philippines. Singapore can also look forward to increased connectivity and trade flows, she added.

Tay Hwee Ling, audit partner of Deloitte Singapore, mentioned that Singapore can support the BRI in fields like accounting, corporate governance and risk assessment.

"The BRI is a big project, and it is not just the physical infrastructure we are looking at," she said. "There is 'software', or financial infrastructure, that also integrates people from different cultures together."