Singapore cut its growth forecast on Tuesday, Aug 13, at between 0 and 1 per cent citing the economy that it said is facing a standstill amid escalations in global trade tensions between the US and China which have stifled the manufacturing sector.
Citing the second quarter deline this year, the downgrade may further transcend the economy into a technical recession if the economy fails to recover in the third quarter consecutively. A technical recession refers to two consecutive quarters of decline in output.
The Ministry of Trade and Industry (MTI) previously narrowed down the forecast range to 1.5-2.5 per cent. In the second quarter, the economy grew by 0.1 per cent, making it the slowest expansion Singapore has seen in a decade. In terms of quarter-on-quarter, it registered a 3.3 per cent decline.
Apart from the US-China trade dispute, a potential trade dispute between Japan and South Korea, besides the looming unrest in Hong Kong, could affect Singapore's outlook, said analysts.
The second quarter witnessed shipments shrank 14.6 per cent while electronics exports declined by 26.9 per cent, from its 17.2 per cent decline in the preceding quarter.
The Government has also slashed its full-year projection for key non-oil domestic exports (Nodx) to between -9 to -8 per cent, down from the range of -2 to 0 per cent. Nodx sank by 14.6 per cent compared to a year ago.
The Monetary Authority of Singapore's chief economist Edward Robinson said that the MAS is monitoring current developments and will take them into account in the next scheduled policy review in October.
"Against this challenging backdrop, the Singapore economy is likely to continue to face strong headwinds for the rest of the year," Permanent Secretary for Trade and Industry Gabriel Lim told media on Tuesday.
"In particular, the electronics and precision engineering clusters will likely remain weak due to the sharp decline in global semiconductor demand. The downturn in these clusters will also affect the wholesale trade segment," he said.
However, he remained hopeful about the aerospace and food and beverage manufacturing segments, information and communications, as well as finance and insurance sectors in services.
In his National Day message last week, Prime Minister Lee Hsien Loong noted that Singapore is experiencing an economic slowdown, but the Republic has experienced such slowdowns in the past and so will it be now. He said,"Should it become necessary to stimulate the economy, we will do so."