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Nikkei Markets

Singapore growth disappoints, trade war shadows outlook

In worst-case scenario, exports may remain flat next year, says trade agency

Singapore expects GDP growth to come in between 1.5% and 3.5% next year, potentially slowing from this year’s 3% to 3.5%.   © Reuters

SINGAPORE (Nikkei Markets) -- Singapore's economy is losing momentum at a faster pace than expected, indicating a rough 2019 when the worsening trade war between the U.S. and China could have a bigger impact on Southeast Asia.

Trade agency Enterprise Singapore said Thursday that the city-state's key trading partners would see weaker growth next year as compared to 2017 and 2018, with risks such as trade tensions, rising global interest rates and tightening financial conditions weighing on global growth and trade flows.

Non-oil domestic exports will likely expand between 0% and 2% next year, slowing sharply from this year's projected expansion of 5.5% to 6.0%, it added.

"The warning lights are flashing. Singapore's economy is feeling the tremors from a slowing global economy and disruptions to global trade," said Maybank Kim Eng economist Chua Hak Bin.

According to the Ministry of Trade and Industry, economic growth slowed to 2.2% for the three months ended September from the same period a year ago. The latest figure was lower than the advance estimate of 2.6% released last month as well as the 2.4% consensus estimate of economists polled by Refinitiv.

The main culprit was manufacturing, which grew by 3.5% instead of the earlier reported figure of 4.5% for the third quarter. Manufacturing, which accounts for about one-fifth of Singapore's economy, had expanded by 10.7% year on year during the second quarter.

Compared to the second quarter, however, gross domestic product increased by a seasonally adjusted and annualized pace of 3.0%, faster than the April-June quarter's pace of 1.0%.

The downward revision to Singapore's third-quarter growth is in line with the trend for other Asian countries, United Overseas Bank said in a note to clients.

Thailand earlier this week reported GDP growth slowed more than expected to 3.3% in the third quarter. In Malaysia, the economy has registered a slowdown for four straight quarters.

Looking ahead at Singapore, ING economists Nicholas Mapa and Prakash Sakpal said that the recent rout in technology stocks in the U.S. clouds prospects for the city-state's tech-heavy manufacturing sector and GDP growth.

According to the Ministry of Trade and Industry, weakness in manufacturing and trade-related services next year would be partly offset by continued strength in the domestic sector.

For example, the information communications industry will be supported by robust demand for IT and digital solutions while the health and social services cluster will get a boost from the ramp-up of operations in healthcare facilities, the ministry said.

Singapore expects GDP growth to come in between 1.5% and 3.5% next year, potentially slowing from this year's 3% to 3.5%.

"The performance of the construction sector is projected to improve in 2019, as the pickup in contracts awarded since the second half of 2017 is expected to translate into construction activities in the quarters ahead," the ministry added.

During the third quarter, the construction sector contracted by 2.3%, weighed down by weakness in public sector construction activities, while services grew 2.4%, slowing from the second quarter's 2.8%.

--Kevin Lim

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