Singapore’s Growth Slackened in Second Quarter of the year

The economy of Singapore progressed at a slower rate in the second quarter with the manufacturing momentum losing its momentum with the risks on the outlook of global trading amid the escalating trade war between the U.S. and China.

Last year’s forecast on the advance gross domestic product (GDP) grew to 4.0 percent in April quarter based on the median estimate of 12 economists surveyed by Reuters. It is slower than the 4.4 percent data on the previous three months of the year.

The advance estimate of second-quarter GDP from the government will be published on Friday.

An economist from DBS bank says “The modest easing is nothing more than a normalization process amid the peaking of the electronics cycle and higher interest rates,”

Yet, the outlook becomes cloudy as the trade tension between the two biggest nation, the  U.S., and China, may “indirectly affect Singapore”, he added.

The Ministry of Trade and Industry foresees a full-year growth of 2.5 to 3.5 percent in 2018. Growth was mainly influenced by the Manufacturing and exports of electronics that resulted in a  3.6 percent rise in GDP last year, which was the quickest pace in three years.

Despite risks on trade war and a sharp decline in exports, manufacturing was considerably steadfast and slightly driven by the services aspect of manufacturing as said by the head of economics and strategy for Mizuho Bank in Singapore, Vishnu Varathan.

Yet, questions were raised regarding the decline in electronics exports for six straight months concerning the overall demand of the sector.

The GDP forecast is an increase of 1.2 percent in three months to June in a seasonally adjusted and annualized basis compared to the previous three months. It showed a slower growth of 1.7 percent in the first quarter as mentioned by nine economists.

The Monetary Authority of Singapore warned risks relative to the perspective of global growth. This has further worsened with the intensifying trade row and the possibility of faster inflation.  

Singapore is expected to keep the rate unchanged on its next policy review in October with risks of growth escalating while inflation remains subdued.

The central bank tightened their monetary policy in April for the first time in six years and analysts are divided is this marks the beginning of tight monetary policy for long-term.