Singapore on Thursday trimmed its economic growth forecast for this year after the economy contracted in the second quarter compared with the previous three months amid rising inflation and tighter monetary policy, the government said.
Steps by central banks around the world to cut borrowing costs to deal with soaring prices have weighed on global demand for Singapore’s exports, with the government painting a bleak picture for the rest of the year.
Economists often see the performance of the city-state’s open, trade-oriented economy as a barometer of global trade activity.
Singapore’s economy is now expected to grow 3.0-4.0 percent this year, down from a previous forecast of 3.0 to 5.0, the Commerce Ministry said in a statement.
The economy grew 4.4 percent year-on-year in the second quarter through June, faster than the previous quarter’s growth of 3.8 percent, it said.
But compared to the previous three months, the economy contracted 0.2 percent, reversing the 0.8 percent expansion in the first quarter.
“The global economic environment has continued to deteriorate since May,” the ministry said.
“Higher-than-expected inflationary pressures and more aggressive monetary tightening in response are expected to weigh on growth in major advanced economies such as the US and the eurozone.”
China, a key market for global exports, “continues to struggle with a deepening housing market downturn and recurring domestic Covid-19 outbreaks,” it said.
“Regardless of recent signs of some easing in global supply disruptions, disruptions are likely to continue for the remainder of the year as underlying factors such as the Russia-Ukraine conflict and China’s zero-Covid policy remain in place,” he added.
Growth in the United States is expected to slow further in the second half of the year, and “the continued disruption in natural gas supplies from Russia could also trigger a sharp slowdown in the euro zone economy,” she warned.
Selena Ling, chief economist at OCBC Bank, said the strong rebound in the aviation and tourism sectors following Singapore’s lifting of coronavirus restrictions should help cushion the impact of slowing global demand.
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