S'pore's economic growth on track despite US-China trade tensions: MAS report

SINGAPORE — The outlook for the Republic's economy this year "remains positive" and will continue to be largely supported by growth from trade-related sectors and modern services, said the Monetary Authority of Singapore (MAS) in its bi-annual Macroeconomic Review report released on Friday (April 27).

The central bank noted in the 117-page report the rise of "digital activities" which will increasingly become an "important growth engine" in modern services, as firms invest in digitalisation efforts which create positive spillovers to industries such as the information & communications technology (ICT) and professional services.

Meanwhile, some domestic-oriented activities such as retail and food and beverage sales weakened marginally at the start of this year in spite of expectations for a "gradual turnaround in consumer sentiment" but the MAS expects consumer spending to pick up alongside the improving labour market.

The trade spat between United States and China poses a "downside risk" to Singapore's economic outlook. Due to the strong industrial linkages between Singapore and China, the imposition of US tariffs on Chinese products would have a "relatively greater impact on Singapore's gross domestic product (GDP) among all tariff actions announced thus far", MAS noted.

Nevertheless, it assesses the overall impact to be "contained, barring an intensification of trade disputes that have spillovers to the Singapore economy".

Global final demand is projected to stay firm in 2018 and rising household incomes should translate into positive consumer and business sentiment, MAS said. The worldwide tech expansion is expected to continue, albeit at a more restrained pace. Against this backdrop, the trade-related sectors should witness further expansion in the quarters ahead, MAS added.

It reiterated that Singapore's gross domestic product growth this year should come in slightly above the middle of the forecast range of 1.5 to 3.5 per cent.

Over the last two quarters, the Republic's economy remained "firmly on an expansion path" where the trade-related sectors "continued to expand alongside the enduring upturn in the global IT cycle", MAS said. The modern services cluster, in particular, contributed steadily during this period, largely anchored by a pickup in pockets of activity within financial services, as well as ongoing digitalisation efforts.

However, there is a "digital divide" among the sectors which was observed from as early as 2012, MAS said. For example, some segments including telecommunications have been facing structural headwinds from technological disruption, which weighed on their performances in the last two quarters.