SINGAPORE -- The Singapore economy is projected to expand 0.5% to 2.5% next year, topping growth in 2019 as the manufacturing sector looks to rebound, the Ministry of Trade and Industry said on Thursday.
This year's growth is expected to be 0.5% to 1%, the ministry said, up from the previous forecast of 0% to 1%.
The nation-state's economy has been hit hard since 2018 due to the U.S.-China trade war, with April-June growth slowing to a 10-year low of 0.2%. GDP growth for July-September, also released on Thursday, was 0.5%, weighed by a 1.7% contraction in the manufacturing sector and 3.3% contraction in the wholesale and retail sector.
Next year's economic performance is especially important for Prime Minister Lee Hsien Loong's government, as the country will likely hold general elections then.
The ministry said it "expects growth in the Singapore economy to pick up modestly in 2020 as compared to 2019," citing recovery in the global electronics cycle -- a key factor in Singapore's production of high-end electronics such as semiconductors.
"The manufacturing sector is expected to return to positive growth, led by a gradual recovery in the electronics and precision engineering clusters," according to a government statement. "Improved conditions in these clusters is also likely to support growth in related sectors such as wholesale trade."
Despite the upbeat news, next year's forecast of 0.5% to 2.5% growth means the economy will still lag the 3.1% recorded in 2018 and 3.7% in 2017.
The ministry pointed out that the U.S.-China trade war poses continued risk in 2020. Moreover, the ongoing unrest in Hong Kong and geopolitical tensions in the Middle East "could lead to financial market volatility, and have negative spillover effects on the region and Singapore," the ministry noted.
Selena Ling, head of treasury research and strategy at Singapore's Oversea-Chinese Banking Corp. said in a note, "Headwinds remain familiar into 2020 amid renewed worries about progress and the actual signing of the U.S.-China trade deal." She added that "this is likely complicated by the ongoing Hong Kong Human Rights and Democracy Act which was passed in the U.S. Senate and House, and President Trump is unlikely to veto the measure."
The bank forecasts GDP growth of 1% to 2% in 2020.