Singapore lowers Q2 GDP growth over tariff war, interest rate hike globally

The Monetary Authority of Singapore in April tightened its monetary policy for the first time in six years

Singapore's economy grew slower than initial estimates in the April-June period on a quarter-on-quarter basis, revised data showed on Monday, as the government flagged a likely moderation in growth in the second half.

The city-state's Ministry of Trade and Industry (MTI) said retaliatory tariffs between the United States and its major trading partners and interest rate increases from central banks globally had tempered the outlook for the export-dependent economy.

Gross domestic product grew 0.6 per cent in the second quarter from the previous three months on an annualised and seasonally adjusted basis, the MTI said.

That was weaker than the initial estimate of a 1.0 per cent expansion, published in July, and the median forecast in a Reuters survey of 1.3 per cent growth.

From a year earlier, the economy expanded 3.9 per cent in the second quarter, marginally above the advance estimate of a 3.8 per cent expansion but lower than the median forecast of 4.1 per cent.

The MTI revised its first quarter growth to 2.2 per cent from 1.5 per cent on a quarter-on-quarter basis and its first quarter year-on-year growth to 4.5 per cent from 4.3 per cent.

"The pace of expansion in the Singapore economy is expected to moderate in the second half of 2018," the MTI said in a press release, citing increased trade tensions between the United States and China and tighter financial conditions globally.

However, it maintained its growth forecast for this year at 2.5 to 3.5 per cent.

"The step down in growth forecasts in the second half of 2018 was anticipated and has been taken into account in MAS' baseline," Jacqueline Loh, deputy managing director at the Monetary Authority of Singapore (MAS), told reporters on Monday.

"Mild inflationary pressures are expected to persist... the current monetary policy stance is appropriate."

Loh said core inflation is expected in the upper half of the central bank's 1-2 per cent forecast range for 2018.

The MAS in April tightened its monetary policy for the first time in six years and upgraded its first quarter GDP last month. Despite a cautious outlook, analysts say further tightening in October is not out of the question.

"I think the somewhat disappointing second quarter revision is not going to be a game changer for MAS. It still gives room for the MAS to tighten," OCBC's Head of Treasury Research, Selena Ling, told Reuters.

"Even if you get a slowdown in the second half, your full year of 3 per cent (growth) still looks like it's in the bag, so it's not disconcerting," Ling added.