IMF slashes Singapore growth to 0.5 per cent, Latest Singapore News - The New Paper

IMF slashes Singapore growth to 0.5 per cent

This article is more than 12 months old

International Monetary Fund projects Asian economies to grow at slowest rate since 2008

The International Monetary Fund (IMF) has slashed gross domestic product (GDP) growth forecasts for Singapore and most other Asian economies for this year and next year relative to its estimates in April.

In its latest Regional Economic Outlook released yesterday, the IMF projects Singapore's growth for this year to be 0.5 per cent, sharply down from the 2.3 per cent it had forecast in its World Economic Outlook in April.

The Government expects growth to come in between 0 per cent and 1 per cent this year.

Some private economists predict the number will be at the lower end of that range.

Singapore's growth last year was 3.1 per cent.

For next year, the IMF estimates Singapore's growth at 1 per cent, compared with its prediction of 2.4 per cent in April.

The IMF forecasts that China's growth will fall to 6.1 per cent this year, and then further to 5.8 per cent next year, from 6.6 per cent last year.

India is also projected to grow at 6.1 per cent this year, down from 6.8 per cent last year.

Among Asian economies, Hong Kong is expected to experience the sharpest slowdown, with gross domestic product growth slowing to 0.3 per cent this year, compared with 3 per cent last year.

In its April projections, which were made before the current political turmoil in the territory, the IMF had forecast that Hong Kong would grow at 2.7 per cent.

Taken together, Asian economies will grow at 5 per cent this year, according to the IMF, their slowest expansion since the global financial crisis of 2008. However, Asia will remain the world's fastest-growing region, contributing more than two-thirds to global growth.

Asia's economies are faced with "a likely prolonged period of heightened global policy uncertainty", according to the IMF.

It noted that while the region's strong trade and financial integration is a sign of its economic success, it can also be a source of vulnerability.

One major risk is a possible escalation of the US-China trade dispute. Among other risks, the IMF flagged the possibility of tighter financial conditions in Asia as a result of abrupt changes in investors' risk appetite, arising from either new trade restrictions or a reassessment of valuations.

Risks for Asian economies also include higher oil prices arising from supply-side shocks such as the drone attack on a Saudi oil refinery last month, an escalation of the trade dispute between Japan and South Korea affecting technology supply chains, and sociopolitical risks in territories such as Hong Kong and Kashmir, which may have economic repercussions.

To cushion the economic slowdown, the IMF recommended that Asian economies pursue accommodative monetary policies, which most are already doing.

They should also reform their product markets - for example, through pro-competition policies - as well as labour markets, by upgrading skills, taking measures to increase labour supply in countries where there are shortages, improving access to education and promoting the participation of women and the elderly in the workforce.