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Singapore survey shows heightened fears about protectionism

Economists forecast growth of 3.2% for this year

Slower-than-expected growth of Singapore's manufacturing sector this year would be partly compensated by an acceleration in finance and insurance activity as well as in the wholesale and retail trade sector.   © AP

SINGAPORE (Nikkei Markets) -- Private-sector economists have raised their growth outlook for Singapore but they also warn that the risks posed by protectionism have increased substantially.

According to the Monetary Authority of Singapore's latest quarterly survey released on Wednesday, the median forecast of 24 economists is that the city-state's economy will grow 3.2% this year, up from 3.0% in the previous survey.

The estimate is at the high end of the government's official forecast of 1.5% to 3.5%, and follows the 3.6% expansion recorded in 2017, which was the fastest pace in three years.

The manufacturing sector is expected to grow by 4.3% this year, down from last year's 10.1%. Economists said the slower growth would be partly compensated by an acceleration in finance and insurance activity as well as in the wholesale and retail trade sector.

A stronger-than-expected performance by the electronics and property industries could offer upside, while the biggest risks stem from an increase in trade protectionism and a slowdown in China, the survey showed.

Electronics exports from Singapore have surged in past quarters, becoming the main driver of the trade-driven economy. However, shipments are slowing, and there is consensus that other sectors will have to pick up to offset the impact.

For the whole of 2018, economists expect Singapore's non-oil exports to grow by 5.5%, slowing from the 8.8% expansion in 2017.

"The possibility of a global trade war scenario presents significant concerns for a large proportion, or 88%, of respondents. This is more than double that in the December survey. The threat of a slowdown in the Chinese economy is comparatively more subdued, at 53% of responses, down from 67% previously," MAS said in its report.

The questions for the March survey were sent out on February 14, indicating that the concerns about protectionism preceded recent developments such as the U.S.'s decision to impose tariffs on steel and aluminum imports from countries other than Canada and Mexico.

The global trade situation could worsen in coming weeks. U.S. media reported on Tuesday that the administration of President Donald Trump is set to impose up to $60 billion of additional tariffs on Chinese goods as punishment for alleged intellectual property theft.

On inflation, the MAS survey showed economists expect the consumer price index to rise by 1.0% in 2018, with core inflation at a higher 1.6%.

The core inflation measure excludes the costs of accommodation and private road transport as these are strongly influenced by government policy.

Consumer prices in Singapore rose by 0.6% last year, reversing two consecutive years of negative inflation. Core inflation stood at 1.5%, rising from 0.9% in 2016.

MAS's half-yearly monetary statement, due mid-April, is widely expected to say that the central bank will allow a modest and gradual appreciation of the Singapore dollar against the currencies of its trading partners. The central bank's current stance is for zero appreciation.

According to the survey, economists expect the Singapore dollar to end this year at 1.29 to the U.S. unit, strengthening from current levels of around 1.31.

--Kevin Lim

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