Singapore's 2019 GDP growth forecast has been cut to 0 to 1 percent.
The Ministry of Trade and Industry (MTI) made this announcement in a press release on Aug. 13, 2019.
This is the second downgrade made by the MTI this year.
It slashed its projection for the economic outlook in May.
Previously, the growth forecast for 2019 was predicted to range from 1.5 to 2.5 percent.
Gross domestic product in Singapore is often seen as a bellwether for global growth because international trade dwarfs its domestic economy.
Economy grew 0.1 percent in second quarter of 2019
MTI added that the Singapore economy grew by only 0.1 percent in the second quarter of 2019, on a year-on-year basis, compared to 1.1 percent in the first quarter.
This was the slowest expansion of the economy in a decade, since contracting by 1.2 percent on a year-on-year basis in the second quarter of 2019.
Additionally, on a quarter-on-quarter seasonally-adjusted annualised basis, the economy contracted by 3.3 percent in the second quarter of 2019, reversing the 3.8 percent growth of the year's first quarter.
Two sectors contracted
MTI highlighted that the two sectors that contracted were the manufacturing, and wholesale and retail trade sectors.
The contraction in the manufacturing sector was responsible for much of the slowdown in the economy.
On a year-on-year basis, the manufacturing sector contracted by 3.1 percent in the second quarter of 2019, compared to a contraction of 0.3 percent in the first quarter.
MTI added that manufacturing output was mostly pulled down by output declines in the electronics, transport engineering and precision engineering clusters, even though there was a rise in output from the biomedical manufacturing and general manufacturing clusters.
Wholesale and retail trade
The wholesale and retail trade sector contracted by 3.2 percent on a year-on-year basis in the second quarter of 2019.
This was a larger decline than the previous quarter's figure of 2.5 percent.
The sector's weakness, MTI noted, was mainly due to the wholesale trade segment, which shrank largely as a result of a decline in the machinery, equipment and supplies sub-segment.
It added that this was in line with the fall in Singapore’s non-oil domestic exports during the same quarter, especially in electronics.
Moreover, the retail trade segment also experienced contraction as a result of both motor vehicular and non-motor vehicular sales falling.
Greater uncertainty in global economic outlook
MTI added that global economic outlook had also weakened due to the escalation of the U.S.-China trade war, as well as its exacerbation of the downturn in the global electronics cycle.
Economies with sizeable electronics and related sectors are expected to face greater drag from the downturn.
The press release also cited greater uncertainty in the global economy as a result of the following four factors:
- The U.S.'s announcement of possible additional tariffs of up to S$300 billion on imports from China,
- A steeper-than-expected slowdown in China's economy, with the additional tariffs having the potential to precipitate a sharp fall in Chinese import demand and negatively affect the region’s growth,
- The risk of a "no-deal" Brexit and its possible adverse effects on consumer and business sentiments in the UK and EU,
- Risks arising from uncertainties in Hong Kong, trade disputes between South Korea and Japan, and geopolitical tensions in North Korea and the Strait of Hormuz.
Some sectors still expected to remain resilient and grow
Some sectors and segments are expected to remain resilient.
The aerospace and food and beverage segments within the manufacturing sector are expected to continue to do well, given firm demand conditions.
Additionally, the information and communications sector grew by 4.1 percent, while the finance and insurance sector grew by 5.2 percent, on a year-on-year basis for the second quarter of 2019.
These two sectors are projected to remain healthy, as a result of sustained demand for enterprise IT solutions and increased demand for payment processing services respectively.
The construction sector also grew by 2.9 percent on a year-on-year basis for the second quarter of 2019, with output being supported by public sector construction works.
MTI stated that this sector's recovery is expected to be sustained.
Top image from Unsplash