Singapore’s economic growth was expected to slow further heading into 2019, amid forecasts for weaker global demand and concerns over the U.S. trade war, analysts said on Wednesday.
The city-state’s gross domestic product (GDP) grew 2.2 percent on-year in the fourth quarter, down from 2.3 percent in the previous period, missing economists’ forecasts, according to preliminary data released by the Ministry of Trade and Industry on Wednesday. A Reuters poll of economists had forecast 2.3 percent growth, while a Bloomberg survey had tipped 2.5 percent.
For the full year, the data showed the economy grew 3.3 percent.
Selena Ling, head of treasury research and strategy at OCBC Bank, said on Wednesday that her full-year forecast for 2019 growth was 2.7 percent.
The fourth quarter data “suggested that the softening global demand environment was starting to weigh into the year-end and the frontloading activities seen earlier to pre-empt the U.S.-China tariffs were starting to fade as well,” she said.
“The external economic environment remains fraught with uncertainties such as whether the 90-day truce for the U.S.-China trade war will materialize into a more lasting deal, geopolitical tensions and lingering questions over China’s growth slowdown,” Ling added. “This is also coupled with a climate of choppy financial markets, somewhat wavering business and consumer confidence, and uncertainty over tightening global financial conditions.”
She noted the government’s official growth forecast was for 1.5 percent to 3.5 percent, suggesting some potential downside risk from 2018 levels.
Nomura was also less than optimistic about Singapore’s growth outlook.
In a note on Wednesday, it projected GDP growth would slow to 1.5 percent on-year in the first quarter of 2019, pointing to weaker external demand amid the global technology downcycle.
Nomura forecast 2019 economic growth of 2.5 percent.
UOB was also cautious on the outlook for the new year, projecting manufacturing activity would slow in the second quarter as the 90-day U.S.-China trade truce may provide some temporary respite for the segment, which expanded 7.5 percent in 2018.
“If what we see now is indeed largely due to frontloading of imports ahead of potentially heavier tariffs after 1 March, then the subsequent payback in the second quarter is likely to be magnified and translating to a weaker manufacturing growth outlook in 2019,” Alvin Liew, senior economist at UOB, said in a note on Wednesday.
Liew said that in addition to the “payback” of frontloading, high base effects, a global electronics slowdown and weaker Chinese economic growth could all weigh on Singapore’s manufacturing sector.
But he added that some relocation of production to Southeast Asia could benefit the city-state’s manufacturers and trade-related services although the time-lag meant there were still concerns over manufacturing.
UOB is forecasting Singapore GDP growth to slow to 2.5 percent in 2019, with risks skewed to the downside.
This article was originally published on Wednesday, 2 January 2019 at 9:55 A.M. SGT; it has since been updated to add comments from UOB.