SINGAPORE: Singapore’s government slashed its economic growth and exports forecasts for 2016 after the economy contracted in the third quarter, reinforcing the risk of a recession amid fresh uncertainty around global trade under U.S. 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 percent this year, compared with the previous projection of 1.0-2.0 percent, the Ministry of Trade and Industry said in a statement on Thursday.
The economy shrank 2.0 percent in the July-September 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 percent 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 U.S. yields and stronger dollar seen after the U.S. 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.”
