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Nikkei Markets

Economists cut growth, inflation forecasts for Singapore

Central bank survey also shows rising concerns about Hong Kong, Middle East

For 2020, Singapore's gross domestic product is likely to expand by 1.6%, down from the 2.3% estimated in the June survey.   © Reuters

SINGAPORE (Nikkei Markets) -- Economists have cut their growth forecasts for Singapore following a spate of weak economic data, citing concerns about the ongoing row between China and the U.S. as well as new problem areas such as the protests in Hong Kong and rising tensions in the Middle East.

According to the Monetary Authority of Singapore's quarterly survey of professional forecasters, private sector economists now expect growth to come in at 0.6% for 2019, down from the median estimate of 2.1% in the previous report.

Among the major sectors of the economy, wholesale and retail trade is expected to contract by 2.8% this year, worsening from an earlier forecast for a 0.3% decline. Meanwhile, manufacturing is expected to shrink by 2.4%, a steeper decline than the 0.2% cited in the previous survey.

For 2020, Singapore's gross domestic product is likely to expand by 1.6%, down from the 2.3% estimated in the June survey.

"Further escalation of trade tensions, in particular between the U.S. and China, again tops the list of downside risks as identified by the survey respondents," MAS said in a report on Wednesday. A further slowdown in China was another major concern.

"In addition, geopolitical risks in places such as Hong Kong and the Persian Gulf were also widely cited as a downside risk, specifically by 38.9% of respondents, up from just 5.9% in the previous survey," MAS said.

Singapore, whose trade is more than three times GDP, is among the countries most vulnerable to a slowdown in global economic growth.

Purchasing managers' index data released late Tuesday showed manufacturing activity in Singapore contracted for a fourth straight month in August, while GDP data last month showed the economy grew by just 0.1% on-year in the second quarter, the slowest pace since the end of the global financial crisis.

The government last month also slashed this year's growth forecast to between zero and 1% from an earlier range of 1.5% to 2.5%.

"The uncertainties around the world have gone beyond the U.S. and China. It includes the uncertainties with Brexit, Japan and Korea, Hong Kong and others," Trade and Industry Minister Chan Chun Sing told Parliament on Tuesday.

On inflation, MAS' latest survey showed economists now expect core inflation to come in at 1.2% in 2019 before rising to 1.3% in 2020. The estimates are lower compared to the June survey when the forecasts for core inflation were at 1.4% for 2019 and 1.6% for 2020.

Core inflation excludes changes in the prices of cars and accommodation, which are influenced more by government policies, and is the main pricing indicator used by MAS when formulating monetary policy.

Singapore's core inflation eased to 0.8% on-year in July, the slowest pace in more than three years.

As for headline inflation, economists are now predicting a 0.7% rise in price levels this year followed by a 1.0% increase in 2020, down from the earlier estimates of 0.9% and 1.4%, respectively.

MAS' latest survey summarises the views of 23 forecasters who closely monitor the Singapore economy.

-- Kevin Lim

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