Singapore’s economy churned out its slowest annual growth in 10 years during the second quarter as its manufacturing sector continued to decline, according to preliminary data. Compared to a year ago, gross domestic product (GDP) expanded 0.1 percent in the second quarter, which fell below the 1.1 percent forecast from a Reuters poll and the revised 1.1 percent growth for the period January thru March.
“Singapore’s highly export-driven economy leaves it very exposed to the US-China trade war and the broader slowdown in world trade. Singapore’s concentration in the electronics sector during a global tech-slump and technology war also take a toll on the economy,” wrote the ING’s chief economist Robert Carnell in a note. “We don’t see any prospect for a substantial improvement in these areas any time soon, though the rate of decline could now be moderating. Nevertheless, the longer the manufacturing sector remains depressed, the more likely this weakness will spill over into services and other sectors.”
Topping the World Competitiveness List
The latest IMD’s 2019 World Competitiveness Rankings saw Singapore surpass the United States to claim the title of the world’s most competitive economy. According to Switzerland-based business school IMD, Singapore’s immigration laws, advanced technological infrastructure, availability of skilled labor and efficient ways to set up new businesses helped it reach the top.
The full list:
- Singapore
- Hong Kong SAR
- USA
- Switzerland
- UAE
- Netherlands
- Ireland
- Denmark
- Sweden
- Qatar
ETF investors can gain exposure Singapore’s market through the iShares MSCI Singapore ETF (NYSEArca: EWS), which tracks the MSCI Singapore Index.
“Trump’s policies from the competitiveness perspective were good and bad. Good in the sense that low taxes benefit the economy,” said Arturo Bris, director of the IMD World Competitiveness Center. “But they’re bad in the sense that closeness and avoiding globalization and trade hurts competitiveness.”
“That’s what we saw last year indeed, that after the tax decreases in the United States, the U.S. climbed to the top position,” he added. “This year, on the contrary, we have observed the impact of the trade war.”
Despite a number of roadblocks heading into 2019 after a rough fourth-quarter market showing to end 2018, the U.S. economy rebounded in the first quarter this year, beating analysts’ expectations of 2.5 percent growth with a 3.2 percent growth number.
The GDP figure represents the strongest rate of growth for the first quarter in four years and matches the 3.2 percent growth experienced a year ago.
Exports helped to drive growth in the first quarter as a a decline in imports and higher inventory investment offset weaker consumer spending and business investment, according to the Commerce Department on Friday.
The higher GDP comes global economic growth remains a primary concern. Earlier this month, the IMF cut its global growth forecast to the lowest level since the financial crisis, citing the impact of tariffs and a weak outlook for most developed markets.
According to the IMF, the world economy will grow at a 3.3 percent pace, which is 0.2 percent lower versus the initial forecast in January.
In addition, the global volume of trade in goods and services will increase 3.4 percent in 2019, which represents a drop from the 3.8 percent gain last year. The IMF, however, did mention that recent policy implementations like the U.S. Federal Reserve keeping interest rates steady are positive signs moving forward.
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