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Nikkei Markets

Economists cut growth forecasts for Singapore yet again

Manufacturing expected to contract as demand withers

SINGAPORE (Nikkei Markets) -- Private sector economists have again lowered their annual growth forecast for Singapore, reflecting increasing concerns about U.S.-China relations that have raised prospects for a sharper slowdown in the global economy.

The Monetary Authority of Singapore's quarterly survey of professional forecasters pegged gross domestic product growth for 2019 at a median 2.1%.

The estimate has trended lower since September last year when it stood at 2.7%. It edged down to 2.6% in the December survey and was at 2.5% in March.

The main reason for the latest downward revision was the gloomier outlook for manufacturing, which is now expected to contract by 0.2% this year, a reversal from the 2.0% growth forecast in the previous survey. Manufacturing accounts for over one-fifth of the Singapore economy.

Wholesale and retail, another sector that is highly dependent on global trade, is seen contracting by 0.3% as compared to the expected expansion of 1.5% in the previous survey.

Singapore, whose trade is more than three times GDP, is among the countries most vulnerable to a slowdown in global economic growth. Last month, the government lowered its full-year growth forecast to 1.5% to 2.5% from an earlier range of 1.5% to 3.5%, and warned of risks stemming from the tensions between the U.S. and China as well as continued uncertainties over Britain's planned withdrawal from the European Union.

In a report last week, the Institute of Chartered Accountants in England and Wales and financial forecasting firm Oxford Economics said Singapore could suffer a recession in 2020 due to its reliance on international trade.

Relations between the U.S. and China have deteriorated in the past few weeks, with U.S. President Donald Trump threatening to extend tariffs to almost all Chinese imports if he fails to meet with Chinese President Xi Jinping at the G20 summit in Osaka later this month.

In a commentary, MAS said concerns about protectionism continued to dominate the list of potential downside risks among the respondents to its latest survey, with 94.1% citing it as a risk compared with 84.2% previously. The central bank received 22 responses although some did not include a commentary on the risks to the forecasts.

"A sharper-than-expected slowdown in China, possibly exacerbated by inadequate policy responses, also remained among the top downside scenarios," the central bank added.

MAS said 29.4% of respondents also pointed to growing risks of a broader global economic downturn, up from 5.3% in the previous survey.

As for inflation, the latest survey showed economists now expect a headline reading of 0.9% this year, down from 1.1% in the previous survey. Core inflation, which excludes accommodation and private road transport, will likely come in at 1.4%, lower than the earlier forecast of 1.7%.

The revised forecasts are in line with the central bank's forecast for headline inflation of 0.5% to 1.5%, and core inflation of 1% to 2%. MAS lowered its inflation outlook in April when it issued its half-yearly monetary policy statement.

--Mrigank Dhaniwala and Kevin Lim

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