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Sino-US trade war impact could be felt by year end; Singapore economy to grow at slower pace: MAS

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The US-China trade war has had a limited impact on the Singapore economy so far, but the negative spillovers could become more pronounced in the latter half of 2018 and next year, the Monetary Authority of Singapore (MAS) said in its half-yearly macroeconomic review on Friday.

The US-China trade war has had a limited impact on the Singapore economy so far, but the negative spillovers could become more pronounced in the latter half of 2018 and next year, the Monetary Authority of Singapore (MAS) said in its half-yearly macroeconomic review on Friday.

This could result in a drag to growth in the coming quarters, coinciding with the maturation of global economic and tech cycles, it added.

But barring a materialisation of downside risks, the MAS maintained that Singapore’s economy is on track to expand at a “slower but still firm pace” for the rest of this year and in 2019.

Growth is expected come in within the upper half of the 2.5-3.5 per cent range in 2018, and moderating slightly next year. 

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Although the trade-related cluster remained the pillar of growth in recent quarters, its contribution has waned alongside the slowing of IT-related activities. Going forward, expansion will be supported by modern services, underpinned by digitisation and innovation. This will benefit segments such as IT & information and consulting services, as well as the financial sector, said the MAS.

Domestic-oriented industries could see an uplift thanks to sustained improvement in the labour market, but the uptick will be uneven due to ongoing structural adjustments, it continued.

Core inflation is expected to average around 2 per cent for the rest of the year and in the first half of 2019, driven by modest, continuing pressures as the labour market is expected to improve.

The review comes two weeks after Singapore’s central bank tightened monetary policy for the second time this year. The slight increase of the slope of the Singapore dollar nominal effective exchange rate (S$NEER) in October had followed the gradual pace of monetary policy normalisation which began in April.