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Economy

Singapore lowers growth outlook, previous figures; warns of trade-war risks

SINGAPORE (Nikkei Markets) -- Singapore warned of risks stemming from the worsening conflict between the U.S. and China as well as the continued uncertainties over Britain's planned withdrawal from the European Union even as it cut its growth outlook for 2019.

The government now expects growth this year to be in a range of 1.5% to 2.5%, down from the earlier forecast of 1.5% to 3.5%, the Ministry of Trade and Industry said on Tuesday.

"The global growth outlook remains clouded by uncertainties and downside risks... There is a risk of a further escalation of the trade conflicts between the U.S. and its key trading partners, especially China. Should this happen and trigger a sharp fall in global business and consumer confidence, investments and consumption could decline, thereby adversely affecting global growth," MTI said in a statement.

Singapore's export-dependent economy is already feeling the chill from slowing demand, with shipments to major markets, including China, in a downtrend. The ripple effect from trade restrictions on China's Huawei imposed by the U.S. government last week, are expected to further hurt Singapore's electronics exports.

Trade agency Enterprise Singapore said Tuesday it now expects non-oil domestic exports to contract by up to 2% this year. Its earlier forecast was for growth of between 0% and 2%.

MTI also pointed to the risk of slower-than-expected growth in the Chinese economy, which could be precipitated by the imposition of further tariffs by the U.S., and the delay in Brexit until October end that could further weigh on consumer and business sentiments in Britain and the EU.

"The possibility of a "no-deal" Brexit remains and could have a negative impact on global growth," the ministry added.

ING Asia Pacific said in a commentary that the curbs on Chinese technology by the U.S. would hit suppliers in Asia and that the slowdown in Singapore was to be expected. Thailand, which releases first GDP data later on Tuesday, is likely to report a sharp slowdown in growth to around 2.8% -- the lowest reading in four years, the Dutch bank added.

According to MTI data, Singapore's economy grew by 1.2% in the first quarter of 2019 from a year ago as manufacturing contracted. The pace was slower than the advance estimate of 1.3% reported last month.

Singapore also revised down fourth-quarter growth to 1.3% on-year from an earlier estimate of 1.9%. This pulled down growth for 2018 to 3.1% from the earlier reported figure of 3.2%.

During the first quarter, the manufacturing sector contracted by 0.5% on-year on the back of output declines in precision engineering and electronics following weak global semiconductor demand. The sector, which accounts for about one-fifth of gross domestic product, grew by 4.6% on-year during the previous quarter.

Wholesale and retail also contracted, driven by weakness in the machinery, equipment and supplies subsegment as non-oil domestic exports declined during the quarter.

The transportation and storage sector expanded by 0.8% on-year, extending the 0.5% increase in the previous quarter, as a rise in the number of passengers handled by Changi Airport offset a fall in sea cargo handled at Singapore's ports.

In contrast, the construction sector grew by 2.9% on-year, turning around after 10 consecutive quarters of contraction, while financial services, which accounts for 13% of GDP, expanded by 3.2% on-year.

On a quarter-on-quarter seasonally-adjusted annualized basis, however, the economy expanded by 3.8%, a reversal from the 0.8% contraction in the preceding quarter, MTI said in a statement.

-- Kevin Lim

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