Over 4 in 5 economists worry trade frictions could heat up

But their forecasts for Singapore GDP remained at 3.2%.

The expectations of Singapore’s economists for 2018 GDP and economy growth remained unchanged at 3.2% and 3%-3.4%, respectively, The Monetary Authority of Singapore (MAS) revealed.

However, its Survey of Professional Forecasters noted that the implementation of trade tariffs by the US and subsequent responses from the affected economies continue to dominate the economists’ list of risks.

About 84% of respondents expect the escalation of trade frictions to present a significant downside risk. Meanwhile, the possibility of a slowdown in China from domestic stresses is comparatively more subdued, with 21% of responses, down from 53% previously.

Instead, tightening monetary policy across the developed world, in particular by the US Federal Reserve, has led to increasing concerns over rising interest rates. This risk is cited by 47% of respondents, up from just 17%.

Meanwhile, the outlook for the domestic property market remains positive, with it topping the list of upside risks at 47% of responses, MAS said. The global tech cycle’s impact on the electronics sector, and external growth in general, continue to be the two other most commonly cited upside risks.

“Nevertheless, the proportions of respondents citing them have fallen, from 47% to 37% for the electronics sector & tech cycle, and from 41% to 32% for external growth, reflecting a slightly less optimistic outlook on these two fronts,” MAS added.

Amongst sectors, there were some positive changes to forecasts for manufacturing (from 4.3% to 5.3%), finance & insurance (from 4.4% to 7%), and accommodation & food services from (from 1.9% to 2.2%). Forecasts for construction (from 1% to -2.1%) and wholesale & retail trade (from 3% to 2%) were revised downwards.

The respondents expect GDP growth to ease to 2.8% for 2019 as a whole. They also estimate the growth outcome for the Singapore economy to be in the range of 2.5%–2.9% next year.

The Singapore economy expanded by 4.4% in Q1 2018 compared with the same period last year. This was higher than the median forecast of 3.8% reported in the March survey.

Meanwhile, CPI-All Items inflation and MAS Core Inflation for Q2 2018 are expected to come in at 0.5% and 1.4%, respectively. The median CPI-All Items inflation for 2018 as a whole is forecast to be 0.8%, down from 1.0% in the March survey. The forecast for MAS Core Inflation in 2018 remains at 1.6%.

For 2019, CPI-All Items inflation is forecast to come in at 1.5%, whilst MAS Core Inflation is expected to be 1.8%.

As for the labour market, the respondents expect the unemployment rate to be 2.1% at year-end, also unchanged from the previous survey.