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Singapore growth forecast slashed to below 1%

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Despite challenges ahead, Singapore "need not be overly pessimistic" as it continues to attract good investments, says Chan Chun Sing

Singapore cut its full-year growth forecast again yesterday as the economy almost came to a standstill in the second quarter of the year, while the outlook for exports worsened considerably.

The Ministry of Trade and Industry (MTI) now expects gross domestic product (GDP) growth to come in between 0 per cent and 1 per cent, with the final figure pegged at around the mid-point of the range.

This is down from its previous forecast range of 1.5 per cent to 2.5 per cent, as the economy logged 0.1 per cent growth in the second quarter.

The downgrade comes amid escalating global trade tensions and weakness in the manufacturing sector.

The MTI expects that Singapore will likely continue facing strong headwinds for the rest of the year.

Trade and Industry Minister Chan Chun Sing said that while Singapore should brace itself for challenges ahead, it "need not be overly pessimistic".

The country continues to attract good investments, and this reflects the confidence that investors have in its long-term value proposition, he added.

Permanent Secretary for Trade and Industry Gabriel Lim told a media briefing yesterday that Singapore faces a challenging backdrop involving a potentially steeper-than-expected slowdown of the Chinese economy and risk of a no-deal Brexit .

Risks may also arise from uncertainties in Hong Kong, the trade dispute between Japan and South Korea, as well as tensions in North Korea and the Strait of Hormuz, he added.

"In particular, the electronics and precision engineering clusters will likely remain weak due to the sharp decline in global semiconductor demand," said Mr Lim.

But he stressed that there remain areas of strength such as the aerospace and food and beverage manufacturing segments, as well as the information and communications, and finance and insurance sectors.

Analysts said the downgrade in the economic forecast was gloomy but realistic, given Singapore's sensitivity to global trade flows.

"The lower-than-expected shift in the official forecast reflects the potential downside risk to growth, given the possibility of further trade actions from US President Donald Trump," said DBS senior economist Irvin Seah, referring to Washington's recent threat of additional 10 per cent tariffs on its remaining US$300 billion (S$415 billion) of Chinese imports come Sept 1.

"This US$300 billion covers a large proportion of electronic products, and definitely will affect the value chain that Singapore is deeply plugged into," said Mr Seah.

Although the deterioration in Singapore's data fuelled speculation that the Monetary Authority of Singapore would ease monetary policy - a move that could weaken the Singapore dollar and help exports - its chief economist Edward Robinson said yesterday that it is not moving outside its regular schedule to change monetary policy.