US-China trade war raises threat of economic recession in Singapore
ANALYSTS forecast that Singapore's crucial manufacturing sector will remain weak this year as it takes a heavy blow from the ongoing US-China trade war
ANALYSTS forecast that Singapore's crucial manufacturing sector will remain weak this year as it takes a heavy blow from the ongoing US-China trade war.
However, senior Singaporean government officials played down fears of a looming full-blown recession after economic growth fell to a decade low, reported Hong Kong's South China Morning Post.
The Lion City's manufacturing sector is reeling from the US-China trade row, prompting economists to offer pessimistic forecasts for the year based on Friday's estimates of second quarter GDP - up just 0.1 per cent year on year.
However, Deputy Prime Minister Heng Swee Keat wrote on Facebook that the government was 'not expecting a full-year recession at this point,' and said instead that there remained 'areas of strength' in the entrepot economy.
Yet, the poor growth figures were even lower than the 1.2 per cent year-on-year growth registered in the first quarter.
Mr Heng, who is also Finance Minister, said the data reflected 'heightened uncertainties and risks in the global economy, especially with the US-China trade relations'.
If that was not emphatic enough, Trade and Industry Minister Chan Chun Sing wrote on Facebook that the steady pipeline of foreign direct investment this year gave confidence to the government that it was on the right track.
'Companies looking for a stable political environment, pro-business ecosystem, skilled workforce, progressive regulations, superior connectivity and rule of law, still see Singapore as an attractive destination,' said Mr Chan.
Few among the analysts who spoke to This Week in Asia struck a similar upbeat note.
Apart from the weak overall GDP growth, the latest figures showed manufacturing contracted by six per cent from the previous quarter, construction was down 7.6 per cent and the services sector decreased by 1.5 per cent. The data strengthens speculation that Singapore could face in the third quarter a technical recession, which is defined as two straight quarters of economic contraction.
Chief among economists' concerns is that the manufacturing sector, which accounts for one-fifth of the country's US$360 billion economy, is not predicted to experience any kind of uptick without a dramatic change in the trajectory of the tariff row between Washington and Beijing.
OCBC Bank's head of treasury research Selena Ling said: 'It is quite obvious that electronics and precision engineering sectors are bearing the brunt of the trade war tension, seeing as how manufacturing has shrunk for consecutive quarters.'
Suggesting that the electronics sector would remain weak in the next quarters entering 2020, lead Asia economist for Singapore at Oxford Economics, Sian Fenner, said export-dependent services would likely be 'heavy losers.'
'We are looking at the transportation and storage as well as the wholesale sector ?they are likely to remain under heavy pressure given the weak global backdrop,' Mr Fenner said.