Singapore Expected to See Sharpest Slowdown in the Region

Singapore’s GDP growth might slow to 1.9 percent in 2019, weighed by a challenging export outlook. Similarly, economic growth across Southeast Asia is expected to decelerate due to weaker Chinese import demand.

Singapore is expected to see GDP growth slowing from 3.1 percent in 2018 to 1.9 percent this year, according to ICAEW’s latest «Economic Insight: South-East Asia» report. Similarly, economic growth across Southeast Asia (SEA) is expected to decelerate, moderating to 4.8 percent in 2019 due to weaker Chinese import demand, a slowdown in the global ICT cycle, and an increase in trade protectionism over the past year.

Overall GDP growth across SEA slowed to 4.6 percent year-on-year in the first quarter of 2019, down from 5.3 percent recorded in the first half of 2018. This is a result of the slump in export growth across SEA economies due to weaker Chinese import demand, a slowdown in the global ICT cycle, and an increase in trade protectionism over the past year.

Under Further Pressure

«We expect exports and overall economic growth to continue to come under further pressure, as the reescalation of trade tensions between U.S. and China is unlikely to ease any time soon,» said Sian Fenner, ICAEW Economic Advisor & Oxford Economics Lead Asia Economist.

«With export volumes already on the downside since the start of the year, any further increase in trade tensions between the world’s two largest economies will likely see a much more prominent slowdown in regional growth,» he added.

Against this more challenging export outlook and benign inflationary pressures, the Monetary Authority of Singapore (MAS) is likely to remove some of last year’s appreciation bias in its SG$NEER, a trade-weighted basket of currencies against the Singapore dollar. As such, the USD/SGD is expected to end 2019 at around 1.37, which is consistent with the SG$ moving towards the centre of its policy band.

Facing a Difficult External Environment

«Renewed trade tensions between the U.S. and China come at a time when export growth across the region is already facing a difficult external environment. With its links to China and dependence on exports, we expect Singapore to experience the sharpest slowdown in GDP growth across the region, with its economy likely to dip into recession in 2020 should external conditions further deteriorate,» Mark Billington, ICAEW Regional Director, Greater China and South-East Asia, said.

• The full Economic Insight: South-East Asia report is available here.