The International Monetary Fund lowered Singapore's growth outlook for 2019 citing weak foreign demand amid trade disputes.
Concluding the Article IV consultation with Singapore, the Executive Board of the IMF on Tuesday said growth is set to slow to 2 percent this year, which was also weaker than the 2.3 percent projected in May. Growth is expected to improve to 2.3 percent in 2020.
"Given global trade tensions, support from external sectors is expected to fall and growth drivers are projected to shift back to domestic demand," the IMF said.
Official data from Singapore, released last week, showed that the city-state economy contracted 3.4 percent in the second quarter as trade wars weighed on the electronics and precision engineering.
The Monetary Authority of Singapore Managing Director Ravi Menon last month said growth outlook for this year is likely to be revised down as downside risks to growth clearly increased.
The MAS said Tuesday that they will review the recommendations of the IMF and undertake appropriate measures to further strengthen financial oversight.
The IMF directors supported the broadly neutral monetary policy stance and recommended that policy remains data-dependent. If downside risks materialize, fiscal policy should be the first line of defense, directors noted.
Further, they observed that Singapore's financial system is considered resilient, underpinned by a strong regulatory and supervisory framework.
However, as liquidity stress tests reveal vulnerability in U.S. dollar liquidity, directors encouraged giving priority to bolstering banks' foreign exchange liquidity.