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Opening remarks by PS Mr Gabriel Lim for Second Quarter 2019 Economic Survey of Singapore

Opening remarks by PS Mr Gabriel Lim for Second Quarter 2019 Economic Survey of Singapore

1 Good morning and welcome to MTI. 

2 I will highlight the key points from the press release.

3 Growth in the Singapore economy moderated in the second quarter of 2019.

On a year-on-year basis, GDP grew marginally by 0.1 per cent in the second quarter, down from the 1.1 per cent in the first quarter. Growth was primarily supported by the finance & insurance, information & communications and other services sectors. 

On a quarter-on-quarter seasonally-adjusted annualised basis, the economy contracted by 3.3 per cent, a reversal from the 3.8 per cent growth in the preceding quarter.  

4 Taking into account the performance of the economy in the first quarter of 2019, GDP grew by 0.6 per cent on a year-on-year basis in the first half of this year. 

5 Since the last Economic Survey of Singapore media briefing in May, the global growth outlook has weakened further, in part due to the escalation in the US-China trade conflict. Just last month, the IMF downgraded its global growth forecast for 2019 to 3.2%. The global electronics downswing has also been sharper than expected. 

6 Looking ahead, we expect growth in several of our key demand markets to weaken in the second half of the year. 

In the US, the economy performed better than expected in the first half of 2019. But we expect GDP growth to moderate in the second half of the year.

The Eurozone’s growth came in weaker in the second quarter of 2019 as compared to the first quarter. Growth momentum there is likely to remain subdued for the rest of the year. 

In Asia, China’s economy expanded at a slower pace in the second quarter as compared to the first quarter. Growth is expected to ease further in the second half of the year on the back of weaker investment growth and a continued decline in exports, exacerbated by the increase in the US’s tariffs on its exports. Within ASEAN and Southeast Asia, growth in the key economies is expected to remain resilient for the rest of the year. 

7 At the same time, uncertainties and downside risks in the global economy have increased since three months ago. 

  First, the US-China trade conflict has further escalated with the US’s recent announcement of possible tariffs on an additional US$300 billion of imports from China. This could severely dent global business and consumer confidence, with adverse implications on global trade and global economic growth.

Second, a steeper-than-expected slowdown of the Chinese economy could be precipitated by additional tariffs imposed by the US, which in turn will affect the region’s exports to China.

  Third, the risk of a “no-deal” Brexit has increased with the leadership change in the UK. A “no-deal” Brexit will affect the UK and EU economies negatively, and lower consumer and business sentiments.

Fourth, there are risks arising from the unrests in Hong Kong, the trade dispute between Japan and South Korea, as well as tensions in North Korea and the Strait of Hormuz.

8 Against this challenging backdrop, the Singapore economy is likely to continue to face strong headwinds for the rest of the year. In particular, the electronics and precision engineering clusters will likely remain weak due to the sharp decline in global semiconductor demand. The downturn in these clusters will also affect the wholesale trade segment. At the same time, the chemicals cluster is likely to soften given weakening import demand from China. In addition, growth in other trade-related services sectors like transportation & storage is likely to ease in tandem with slowing global trade volumes.

9 Nevertheless, there are several areas of strength in the Singapore economy. The aerospace and food & beverage manufacturing segments are expected to do well given firm demand conditions. The information & communications and finance & insurance sectors are projected to remain healthy, due to sustained demand for enterprise IT solutions and payment processing services respectively. Meanwhile, the education, health & social services segment is likely to continue to grow steadily. The recovery in the construction sector is also expected to be sustained. 

10 Taking into account all these factors, as well as our GDP performance in the first half of the year, the GDP growth forecast for 2019 has been downgraded to “0.0 to 1.0 per cent”, down from “1.5 to 2.5 per cent”. MTI’s central view is for GDP growth to come in at around the mid-point of the revised forecast range. 

11 Together with my panel members, I am happy to take your questions now. Thank you.

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