Singapore's export and manufacturing woes spur economic slowdown in 2019

GDP growth is expected to decline to 2.4% in 2019 from 3.2% in 2018.

Singapore braces for economic slowdown brought about by a more challenging environment for exports and the manufacturing sector. The Institute of Chartered Accountants in England and Wales (ICAEW) forecasts GDP growth to decline to 2.4% in 2019 from 3.2% in 2018.

“Whilst Singapore showed some improvement in terms of exports growth in January, the data is likely to be volatile in the first quarter given the timing of Chinese New Year,” ICAEW said.

Mark Billington, ICAEW regional director, South-East Asia, commented, “Whilst the mildly expansionary budget will support growth, we maintain our cautious outlook for Singapore’s economy, given the slowdown in global trade and the likely impact on Singapore’s manufacturing and externally-dependent service sectors.”

ICAEW noted that the Singapore government announced a “mildly expansionary” budget for 2019 with room to intervene should economic conditions worsen sharply against a backdrop of moderating economic growth and external risks. “Whilst certain initiatives like the Bicentennial Bonus for low-income individuals are welcome, this is unlikely to lead to any significant bounce in household spending in Singapore this year,” ICAEW added.

It is also likely that additional risks to growth are posed by Singapore’s exposure to China, both directly to domestic demand and via supply chains, the firm said. “Moreover, despite the recent truce in the US-China trade war, trade protectionism is likely to dampen private sentiment and investment intentions, with momentum in corporate profits also forecasts to soften.”

A moderate acceleration in employment growth is likely to support wage growth of around 3.7%, similar to 2018, ICAEW said. “Momentum in household spending is expected to moderate from the strong gains in most of 2018 as higher domestic interest rates and negative wealth effects (associated with the fall in equity prices in 2018) will reduce households’ spending power.”

“Meanwhile, government measures to support businesses and encourage investment, particularly in adapting to Industry 4.0, should continue to back and provide a boost to planned infrastructure investment,” ICAEW added and said this should support investment over the next 18 months.