Gross domestic product should grow between 5 percent and 6 percent this year, down from a previous forecast of as much as 7 percent, the Trade and Industry Ministry said.
The ministry also reduced its growth forecast for non-oil domestic exports to between 6 percent and 7 percent from an earlier prediction of between 8 percent and 10 percent.
“While a recession is not within our central scenario and growth momentum is still likely to pick up in the second half, the uplift could be weaker than anticipated given the downside risks to the global economy,” said Irvin Seah, an analyst with DBS bank, which lowered its GDP forecast to 6.2 percent from 7 percent.
Singapore’s economy — which depends on manufacturing, tourism and finance — is one of the most sensitive in Asia to global growth. The city-state suffered a brief but sharp recession in the first half of 2009 in the wake of the global financial crisis, but roared back with 15 percent growth last year.
Despite slowing economic growth, the central bank plans to maintain its current policy of allowing a gradual appreciation of the Singapore dollar in a bid to contain inflation, Ong Chong Tee, deputy managing director of the Monetary Authority of Singapore, told reporters Wednesday.
“Both price stability and economic growth are important considerations that we took into account in our monetary policy formulation,” Ong said. “We believe that the current monetary policy stance remains appropriate.”
The Singapore dollar has gained about 5 percent so far this year to SG$1.21 per US dollar after strengthening 9.3 percent last year. Singapore’s central bank uses its currency, rather than interest rates, to influence economic conditions.
Singapore’s annual inflation rate jumped to 5.2 percent in June from 4.5 percent in May.
The city-state’s economy grew 0.9 percent in the April to June period from a year earlier, more than the 0.5 percent growth in preliminary results released last month, the ministry said. The economy contracted a seasonally adjusted and annualized 6.5 percent from the first quarter, better than the 7.8 percent drop initially announced.
Manufacturing slid 5.9 percent in the second quarter from a year earlier while services grew 3.9 percent and construction expanded 1.5 percent, the ministry said.
Nonoil domestic exports grew 2.1 percent last quarter after jumping 12 percent in the first quarter, weighed down by a 11 percent drop in demand for electronics in the first half, the ministry said.
