Amid the escalating US-China trade war, Singapore cut its economic growth outlook for this year on Tuesday to 0.0%-1.0% from the previous estimate of 1.5%-2.5%.
“Against this challenging external macroeconomic backdrop, and the deepening downturn in the global electronics cycle, the Singapore economy is likely to continue to face strong headwinds for the rest of the year,” said the Ministry of Trade and Industry in a statement.
The country’s downward revision is much more drastic than IMF’s in July.
According to IMF, Singapore’s economic growth will slow to 2% this year as a result of global trade conflicts but the lender estimates that its growth will stabilize in the medium term around 2.5%.
The island state’s final Q2 numbers showed GDP dropping an annualised 3.3% quarter-on-quarter, compared with the previous projection of a 3.4% drop.
Year-on-year, Singapore’s economy expanded 0.1% in Q2.
While a slowdown is expected, the country’s monetary policy remains unchanged and the central bank isn’t considering holding an off-cycle policy meeting, according to Edward Robinson, deputy managing director of the Monetary Authority of Singapore in a briefing.
Export sank further
Exports also dived in June to their second-worst since the global financial crisis in 2008.
According to data from Enterprise Singapore—a statutory board under the Ministry of Trade and Industry, non-oil domestic exports contracted 14.6% year-on-year in Q2 as shipments of both electronic and non-electronic products declined.
In addition estimate for non-oil exports this year was revised downward to -9% to -8%, from previous-2% to 0%, Enterprise Singapore noted.
Singapore’s PMI fell for the second straight month after shrinking 0.3 point to 49.6 in June.
This is the lowest since August 2016, according to the Singapore Institute of Purchasing and Materials Management (SIPMM).
It was attributed to first-time contractions in key indicators including new orders, factory output, inventory and employment level.
Despite the economic slowdown, IMF said Singapore’s financial system is resilient and underpinned by a strong regulatory and supervisory framework.
However, IMF noted that liquidity stress tests indicate vulnerability in US dollar liquidity, advising the country to bolster banks’ foreign exchange liquidity.