Singapore GDP to lag ASEAN peers in 2019: ICAEW

Economic growth is expected to decline to 1.9% from 3.1% in 2018.

Singapore is expected to experience the sharpest economic slowdown in the region, with gross domestic product (GDP) growth slowing from 3.1% in 2018 to 1.9% this year, according to The Institute of Chartered Accountants in England and Wales (ICAEW).

According to a report, whilst sequential growth was up by 0.9% QoQ, the details were mixed. Household spending remained resilient and non-residential and infrastructure construction were strong; however, growth has eased and demand for durable goods, such as motor vehicles, is particularly weak, ICAEW said.

The impact of weaker global trade and US-China trade tensions are also increasingly being felt, the firm said. “Exports were 2.1% lower than a year ago in Q1 2018, whilst concerns over the outlook for external demand saw investment in machinery and equipment fall and firms opting to reduce stocks. Looking ahead, the outlook for exports is weak, following more tariff hikes by the US and China,” it added.

In Singapore, the outlook for construction (outside of the residential sector) over the next 18 months is positive, given the continued recovery in non-residential construction and ongoing public infrastructure projects such as the North-South Corridor. “However, businesses are likely to remain cautious given the weaker global trade backdrop, resulting in more subdued investments in machinery and equipment moving forward,” ICAEW said.

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 SGDNEER, ICAEW noted. “As such, the USD/SGD is expected to end 2019 at around 1.37, which is consistent with the SGD moving towards the centre of its policy band.”

Mark Billington, ICAEW regional director, Greater China and South-East Asia, said, “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.”