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Recession looms in Singapore as trade war weighs on economy

An aerial view shows commercial and residential buildings in central Singapore, June 22, 2019. REUTERS/Loriene Perera
An aerial view shows commercial and residential buildings in central Singapore, June 22, 2019. (PHOTO: REUTERS/Loriene Perera)

By Michelle Jamrisko

(Bloomberg) -- Singapore’s economy will probably experience a “shallow technical recession” in the third quarter as the global trade outlook worsens, according to Maybank Kim Eng Research.

The escalating U.S.-China trade conflict is weighing on Singapore’s export-reliant economy, which Maybank expects will grow 1.3% this year, down from a previous projection of 1.6% and lower than the government’s forecast range of 1.5% to 2.5%.

“Disruptions to the supply chain will likely intensify as the trade war broadens to tech and the U.S. imposes export controls on more Chinese tech firms,” Maybank economists Chua Hak Bin and Lee Ju Ye said in a note.

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The slump in exports has hit manufacturing, which contracted more than expected in May, data on Wednesday showed. The outlook for electronics, which make up 27% of factory output, is particularly weak since U.S. export controls may hit chip makers like Broadcom Inc. and Intel Corp., which operate in Singapore, Maybank said.

A recession is defined as two consecutive quarters of negative quarter-on-quarter growth, and if that happens it will increase the chance of the central bank easing monetary policy in October, the economists said. The Monetary Authority of Singapore, which uses the exchange rate as its main tool, left its policy settings unchanged in April.

© 2019 Bloomberg L.P.