Trade war could drag Singapore's GDP down to 2.7%: analysts

There could be further dampening effects on business and consumer sentiments into 3Q2018.

Singapore’s GDP for the second quarter of 2018 disappointed due to lower gains in the manufacturing sector and continued weakness in the construction sector. This has pulled down some analysts’ expectations for the GDP for the whole year.

OCBC Treasury Research noted that 2018 GDP could still hit its forecast of 3% even if H2 growth decelerates to 2% YoY. “The six-million dollar question remains if the ongoing US-Sino trade war will escalate or de-escalate in the coming months and if the next leg of the US$200b tariff list by the US will materialise after the public comment period ends in August,” it said.

If so, there could be further dampening effects on business and consumer sentiments into 3Q2018. The firm said there is downside risk of around 0.3 ppt to bring it to 2.7%.

RHB Research also has a GDP forecast of 3% for 2018, which is “in line with a moderation in exports and the shift towards a healthy although moderate semiconductor cycle this year,” it said.

“However, we believe overall economic growth will likely remain resilient, as exports are expected to continue growing, albeit slower, and domestic demand is set to be resilient this year driven by regulation-led machinery upgrades,” it commented.