Singapore slashes 2016 growth, export outlook

> As economy stumbles, analysts forecast rocky path ahead that could include technical recession

SINGAPORE: Singapore’s government slashed its economic growth and export forecasts for 2016 after the economy contracted in the third quarter, reinforcing the risk of a recession amid fresh uncertainty around global trade under US President-elect Donald Trump.

Exports in much of Asia’s trade-reliant economies have crumbled in the past year due to stubbornly weak external demand, with Singapore’s manufacturers one of the hardest hit as growth in regional locomotive China cooled.

The trade-reliant economy is expected to grow 1.0-1.5 % this year, compared with the previous projection of 1-2%, the Ministry of Trade and Industry said in a statement yesterday.

The economy shrank 2% in the JulySeptember period from the previous three months on an annualised and seasonally adjusted basis, the ministry said, better than the government’s initial estimate on Oct 14 of a 4.1% contraction.

The external and domestic headwinds have raised the risk of a recession in Singapore, and heightened the chance of fiscal or monetary stimulus over the near term, analysts said. The central bank held its exchange-rate based policy unchanged in its October meeting, though some analysts say a deteriorating growth outlook could force it to ease again at its next review in April 2017.

ANZ economist Weiwen Ng said the risk of a recession in the current quarter cannot be ruled out, though that is not ANZ’s core view at this stage.

The higher US yields and stronger dollar seen after the US election could divert capital flows away from Asia and lead to higher domestic interest rates and tighter financial conditions in Singapore, he said.

“Therein lies the risk of a possible sharp downturn in Q4.”

MTI’s central view is that the economy will avoid a technical recession in the fourth quarter, its Permanent Secretary Loh Khum Yean told reporters, adding that GDP is expected to grow 1% to 3% in 2017.

The Singapore dollar hit a 10-month low of S$1.44 (RM4.45) versus a broadly strong US dollar yesterday.

All the same, there are few signs of a pick up in Singapore.

With Trump’s Nov 8 election victory and his campaign promise to tear up international trade deals threatening to shatter a fragile global recovery, Singapore’s open economy remains among some of the most vulnerable markets to US protectionism. – Reuters