S’PORE FACING RECESSION?
MAS says not ruling out off-cycle monetary easing and may review 1.5-2.5pc growth forecast
SINGAPORE’S central bank is reviewing its 1.5-2.5 per cent economic growth forecast for this year and isn’t ruling out off-cycle monetary easing as the United States-China trade war roils the export-dependent economy, said its chief Ravi Menon yesterday.
Singapore’s economy is expected to grow at its slowest pace in a decade this year, and some are predicting a recession next year, with the high-tech manufacturing hub more vulnerable to the trade war than others in Southeast Asia.
Recent economic indicators suggest year-on-year economic growth could be weaker in the second quarter than a decade-low 1.2 per cent achieved in the first quarter due to a global slowdown partly caused by trade tensions, said Menon.
“The Singapore economy is in for a rougher ride,” said Menon in a speech that accompanied the release of the Monetary Authority of Singapore’s (MAS) annual report.
“We need to be alert but there is no need to be alarmed.”
The central bank and trade ministry would wait for second quarter growth numbers next month before finalising any revision to the full-year forecast, said MAS chief economist Edward Robinson.
A raft of bleak data has prompted economists to raise bets of monetary easing at the MAS’ next semi-annual policy meeting in October, or even earlier if the global growth outlook dims and the US Federal Reserve cuts interest rates.
Menon said its current monetary policy was appropriate.
But when asked about the prospect of offcycle monetary policy moves, he said nothing was off the table.
MAS last made an off-cycle move when it unexpectedly eased policy in January 2015 to counter deflationary pressures and
slowing growth.
“There are a whole lot of new factors on the horizon that we are carefully studying. Of course analysts will come up with a range of possibilities and I wouldn’t rule any of them out at this point,” said Menon.
Singapore is seen as a potential beneficiary from any capital flight from Hong Kong where a local government plan to allow extraditions of suspects to face trial in China for the first time set off days of street protests.
Menon said there were no signs of “any significant shift of business or funds” from Hong Kong to Singapore and that any upheaval in its rival financial centre in the region could actually be negative for the city-state.
“Prolonged uncertainty in Hong Kong is not good for Singapore,” said Menon.
Meanwhile, Maybank Kim Eng Research said Singapore’s economy would probably experience a “shallow technical recession” in the third quarter as the global trade outlook worsens.
The escalating US-China trade conflict is weighing on Singapore’s export-reliant economy, which Maybank expects will grow 1.3 per cent this year, down from a previous projection of 1.6 per cent and lower than the government’s forecast range of 1.5-2.5 per cent.
“Disruptions to the supply chain will likely intensify as the trade war broadens to tech and the US imposes export controls on more Chinese tech firms,” said Maybank economists Chua Hak Bin and Lee Ju Ye.
The slump in exports has hit manufacturing, which contracted more than expected in May, data on Wednesday showed.
The outlook for electronics, which make up 27 per cent of factory output, was particularly weak since US export controls might hit chipmakers like Broadcom Inc and Intel Corp, which operated in Singapore, said Maybank.