Trade war to hit Singapore most in SE Asia, recession in 2020 a possibility.

SINGAPORE — Export-dependent Singapore is expected to be hurt the most among major South-east Asian economies, as fears of more trade tariffs between the United States and China set in. This is based on a report released on Tuesday (June 4) by the Institute of Chartered Accountants in England and Wales (ICAEW) and financial forecasting firm Oxford Economics.

Singapore’s economy is projected to slide from the 3.1 per cent growth last year to 1.9 per cent this year, before recovering slightly to 2.2 per cent in 2020.

It is the sharpest predicted slump out of six South-east Asian nations tracked by the institute, which includes Indonesia, Malaysia, the Philippines, Thailand and Vietnam. Singapore’s projected performance this year falls below the 4.8 per cent growth forecast for the year across the region. ICAEW’s 2019 forecast for Singapore comes within the Ministry of Trade and Industry’s prediction of 1.5 to 2.5 per cent gross domestic product (GDP) growth announced last month.

ICAEW’s regional director Mark Billington said: “With its links to China and dependence on exports, we expect Singapore to experience the sharpest slowdown in GDP growth across the region, with its economy likely to dip into recession in 2020 should external conditions further deteriorate.”


In the first quarter of this year, Singapore's economy grew by 1.2 per cent. This is the lowest growth rate in nearly 10 years, performing worse than the Government’s flash estimate and projections by economists.

The ICAEW report gave several reasons for a possible slowdown:

  • There was a rise in trade protectionism over the past year, which is increasingly being felt in Singapore as it has an open and trade-dependent economy. Coupled with weaker global trade, exports were 2.1 per cent lower in the first quarter of this year than in the same period last year, mainly due to a sharp fall in goods exports.

  • The outlook for exports remains downbeat, pressured downward by threats of more tariff hikes between the US and China in the coming quarters. Both countries rank among Singapore’s largest trading partners.

  • ​The global information and communication technology cycle is slowing down, which will affect electronics manufacturing sectors here. Investment in machinery and equipment fell and firms had opted to reduce stocks.

  • Singapore is affected by lower imports demand from China. Reports said that China’s domestic economy has been generally slowing down since 2016, made worse by the bitter trade war.

In the meantime, Singapore’s domestic demand, which includes household spending and the construction industry, has remained resilient and could offset the fall in trade. The construction sector will be held up by ongoing public infrastructure projects such as the 21.5km North-South Corridor by the Land Transport Authority. However, the growth of residential construction activities has eased, and demand for durable goods such as motor vehicles has weakened.

The Monetary Authority of Singapore could remove the appreciation bias of its S$NEER, a trade-weighted basket of currencies against the Singapore dollar, ICAEW predicted.

As such, the exchange rate between the US and Singapore currencies is expected to come in at around 1.37 at the end of this year, it added.


All six South-east Asian economies are predicted to experience slower growth. However, Vietnam’s economy, which a recent report said would overtake Singapore’s in a decade, is expected to be the fastest-growing in the region.

  • Vietnam’s economy is expected to grow by 6.7 per cent this year, making it the fastest in South-east Asia. ICAEW said that it expects foreign direct investment to be strong in Vietnam, with its manufacturing production continuing to be a significant growth driver. Vietnam’s merchandise exports grew by 10.4 per cent year-on-year in April.

  • However, while trade diversion from the re-escalation of US-China trade tensions may temporarily benefit Vietnam, it is still highly exposed to China, ICAEW said. The country’s GDP growth is expected to decelerate modestly to 6.1 per cent in 2020.

Mr Mark Billington, ICAEW’s regional director in Greater China and South-east Asia, said that renewed trade tensions between the US and China come at a time when export growth across the region is already facing a difficult external environment.

Ms Sian Fenner, ICAEW’s economic advisor and Oxford Economics’ lead Asia economist, said: "We expect exports and overall economic growth to continue to come under further pressure, as the re-escalation of trade tensions between the US and China is unlikely to ease any time soon.

“With export volumes already on the downside since the start of the year, any further increase in trade tensions between the world’s two largest economies will likely see a much more prominent slowdown in regional growth."