Singapore will not be spared from the effects of a slowdown in China’s economy, according to DBS.
“China has presented both enormous opportunities as well as challenges for the island state over the last few decades. While Singapore has benefited greatly from a strategy of engagement with this East Asian dragon over the years, it has also made itself susceptible to the economic cycle within China. Any change in China’s economic policy will impact Singapore.”
The biggest impact is likely to be felt in the tourism sector as China is the second largest market for the city-state. “If Chinese tourist arrivals start to decline, the effect will be felt across the entire tourism value chain from the hotels to retail outlets, casinos as well as the F&B business,” DBS said.
An anticipated moderation in intra-regional trade will also weigh down trade-dependent industries including wholesale trade and transportation services.
The property market will also likely feel the pinch, considering that Chinese buyers comprise 5.2 percent of the total number of buyers in the republic.
“Singapore GDP growth will slow no doubt if China decides to aim for lower growth. Yet, inflation will spike again from April next year when the COE effect lapses. Underlying cost pressure within the economy remains high,” DBS noted.
“With inflation risk lingering, room for monetary policy manoeuvring is limited despite the slower growth. Juxtaposed against the belief of policy-makers that a continued appreciation in the Sing dollar will complement the existing restructuring of the economy, the Monetary Authority of Singapore is unlikely to deviate from the current exchange rate policy stance in the near future.”
Nikki De Guzman, Junior Journalist at PropertyGuru, edited this story. To contact her about this or other stories email nikki@propertyguru.com.sg
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