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Singapore's economic growth to remain steady in 2018 despite rising trade friction

Singapore's economy should continue to expand in 2018 although protectionism risks have risen.  Overall growth in gross domestic product (GDP) is expected to come in at around 2.5 per cent to 3.5 per cent in 2018, unchanged from an earlier official forecast released in May. While the central prognosis for the Singapore economy this year remains intact, spillovers from global trade conflicts bear close watching.

These spillovers arise from Singapore's role as a node in the regional electronics production value-chain, as well as a hub for air and sea transport and financial intermediation services, he said. Bilateral trade between the United States and China indirectly contributes to about 1.1 per cent of Singapore's GDP.  Flows between the US and EU add another 0.5 per cent, while Nafta trade, which is between the US and Canada and Mexico, contributes 0.6 per cent. 

The global economy is still in good shape but the momentum has started to flag and tail risks have grown.  So while global growth should be good this year, it may not be quite as good as last year. However, that Asian economies are in a relatively stronger position to absorb these financial shocks. Economic fundamentals in emerging Asian economies are stronger since the taper tantrum in 2013.  Foreign reserves and bank capital buffers are larger while financial regulatory frameworks are more robust. And policymakers in Asia are more prepared to make macro-policy adjustments as needed, including pre-emptive interest rate hikes to support exchange rate stability. 


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