According to research done by Maybank Kim Eng, it is likely that Singapore’s economy will face a “shallow technical recession” in the next quarter, Q3, with the worsening global trade outlook.

The escalating US-China Trade war is straining Singapore’s highly export-reliant economy with its growth projected at 1.3% this year, below the official government’s forecast range of 1.5% to 2.5%. Trump’s tariffs on China’s have increased uncertainty, lowered investment and weakened trade growth in the global market. Recent developments have shown that the trade war is broadening and the US on continuing to impose export controls on Chinese tech firms. These impacts are becoming visible in Singapore as we see the worst growth performance in a decade.

With growth in the past 6 months “looking to be quite weak, particularly in the trade-related sectors”, MTI (Ministry of Trade and Industry) and MAS (Monetary Authority of Singapore) are relooking at the 1.5% to 2.5% forecast range for GDP growth this year, said MAS managing director Ravi Menon on 27 June.

However, while we need to be alert, “there is no need to be alarmed,” said Mr Menon. Though in the short-term, Singapore’s growth is stunted by global events, “domestic economic restructuring is proceeding well and will enable the economy to emerge stronger”.

As for inflation, MAS’ current monetary policy stance of a “modest and gradual appreciation path of the S$NEER (Singapore dollar’s nominal effective exchange rate) policy band” is said to be the best course of action given the subdued inflation and weakening growth prospects.