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Singapore considers cut to growth forecast as trade war hits exports

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Singapore considers cut to growth forecast as trade war hits exports
FILE PHOTO: The logo of the Monetary Authority of Singapore (MAS) is pictured at its building in Singapore in this February 21, 2013 file photo. REUTERS/Edgar Su   -   Copyright  Edgar Su(Reuters)
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By John Geddie

SINGAPORE (Reuters) – Singapore’s central bank is reviewing its 1.5-2.5% economic growth forecast for this year and isn’t ruling out off-cycle monetary easing as the U.S.-China trade war roils the export-dependent economy, its chief Ravi Menon said on Thursday.

Singapore’s economy is expected to grow at its slowest pace in a decade this year, and some are predicting a recession in 2020, with the high-tech manufacturing hub more vulnerable to the trade war than others in Southeast Asia.

Recent economic indicators suggest year-on-year economic growth could be weaker in the second quarter than a decade-low 1.2% achieved in the first quarter due to a global slowdown partly caused by trade tensions, Menon said.

“The Singapore economy is in for a rougher ride,” Menon said in a speech that accompanied the release of the Monetary Authority of Singapore’s (MAS) annual report.

“We need to be alert but there is no need to be alarmed.”

The central bank and trade ministry will wait for second quarter growth numbers in July before finalising any revision to the full-year forecast, said MAS’ chief economist, Edward Robinson.

Thailand’s central bank cut its 2019 economic growth forecast on Wednesday, but held interest rates.

A raft of bleak data has prompted economists to raise bets of monetary easing at the MAS’ next semi-annual policy meeting in October, or even earlier if the global growth outlook dims and the U.S. Federal Reserve cuts interest rates.

Menon said its current monetary policy was appropriate, but asked about the prospect of off-cycle monetary policy moves, he added that nothing was off the table.

MAS last made an off-cycle move when it unexpectedly eased policy in January 2015 to counter deflationary pressures and slowing growth.

“There are a whole lot of new factors on the horizon that we are very carefully studying. Of course analysts will come up with a range of possibilities and I wouldn’t rule any of them out at this point,” Menon said.

Singapore is seen as a potential beneficiary from any capital flight from Hong Kong where a local government plan to allow extraditions of suspects to face trial in China for the first time set off days of street protests.

Menon said there were no signs of “any significant shift of business or funds” from Hong Kong to Singapore and that any upheaval in its rival financial centre in the region could actually be negative for the city-state.

“Prolonged uncertainty in Hong Kong is not good for Singapore,” Menon said. “People tend to see too much through the lens of competition.”

(Reporting by John Geddie; Additional reporting by Fathin Ungku; Writing by Joe Brock; Editing by Jacqueline Wong & Shri Navaratnam)

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