Singapore’s trade-driven economy grew 1.8 percent last year, the slowest pace since the global financial crisis in 2009, after dodging a technical recession in the fourth quarter, official data showed Tuesday.
Analysts warned growth in 2017 could even be more subdued if rising protectionism crimps global trade and further rises in US interest rates put more pressure on the local economy.
“Singapore has comfortably dodged a technical recession in Q4 2016, but we expect the local economy to remain in ‘slow-mo’,” said Weiwen Ng, Southeast Asia economist at banking group ANZ.
“The prospects of a more protectionist trade policy poses headwinds to Singapore’s economy who is still wedded to the old export-led growth model,” Ng said in a note.
There have been concerns among Asia’s export-driven economies about rising protectionism in the West, where globalization and free-trade deals have been blamed for sending jobs abroad and opening the floodgates to immigrants.
Donald Trump, who will be sworn in as US president on January 20, has vowed to tear up the Trans-Pacific Partnership, a major trade deal negotiated by outgoing President Barack Obama.
Singapore is a key member of the 12-nation TPP which contains market-opening provisions that go well beyond cutting tariffs.
Singapore’s trade ministry said Tuesday that the city-state’s economy expanded 9.1 percent quarter-on-quarter in the three months to December, reversing a 1.9 percent contraction the previous quarter.
A technical recession refers to two straight quarters of quarter-on-quarter contractions.
Last year’s growth is below the 2.0 expansion in 2015.
“The big picture is that Singapore’s growth looks set to remain weak over the next couple of years against a backdrop of tightening domestic monetary conditions,” said Capital Economics’ regional economist Krystal Tan.
Recovery in exports seems “unlikely” as global growth is expected to be lackluster in the coming years, Tan said in a research note.
“Moreover, there remain significant downside risks to global trade, notably a turn towards protectionism in the US,” she said.
Singapore, among Asia’s most-export dependent nations, is seeking new growth engines to boost incomes as its population ages and trade falters. With global growth under pressure and the US threatening to turn more protectionist under Donald Trump, the outlook remains cloudy. That will be a consideration for the central bank in its April policy review after it signaled in October it will stick to its neutral currency policy for an extended period of time.
“Overall, we are not doing badly, considering the global economic uncertainties,” Prime Minister Lee Hsien Loong said in a New Year message Dec. 31. “While the labor market has eased, unemployment remains low and we are still creating new jobs.”
The Singapore dollar erased an earlier decline after the GDP report, trading little changed at 1.4503 against its U.S. counterpart as of 8:44 a.m.
“I still think Singapore is in a very challenging condition,” said Edward Lee, regional head of research at Standard Chartered Plc in Singapore, who expects 2017 growth to slow to 1.4 percent. “External conditions remain extremely challenging and we certainly have to be watchful for materialization of anti-globalization and anti-trade sentiment. Any materialization of that will further dampen the already very weak global trade conditions.”