SINGAPORE (BLOOMBERG) - Singapore's economy will probably experience a "shallow technical recession" in the third quarter as the global trade outlook worsens, according to Maybank Kim Eng Research.

The escalating United States-China trade conflict is weighing on Singapore's export-reliant economy, which the Maybank economists expect will grow 1.3 per cent this year, down from a previous projection of 1.6 per cent and lower than the Government's forecast range of 1.5 to 2.5 per cent.

The Singapore economy grew by 1.2 per cent in the first quarter of 2019, moderating from the revised 1.3 per cent growth in the fourth quarter of last year.

"Disruptions to the supply chain will likely intensify as the trade war broadens to tech and the US imposes export controls on more Chinese tech firms," economists Chua Hak Bin and Lee Ju Ye said in a note.

The slump in exports has hit manufacturing, which contracted by a more-than-expected 2.4 per cent in May, led by a 10.8 per cent slump in electronics shipments, data on Wednesday (June 26) showed. A recession is defined as two consecutive quarters of negative quarter-on-quarter growth.

Maybank Kim Eng said the outlook for electronics, which makes up 27 per cent of factory output, is particularly weak since US export controls may hit chipmakers such as Broadcom and Intel Corp, which operate in Singapore.

If a recession happens, it will increase the chance of the central bank easing monetary policy in October, the economists said. The Monetary Authority of Singapore, which uses the exchange rate as its main tool, left its policy settings unchanged in April.

For Singapore's second-quarter economic growth, Maybank Kim Eng said early estimates out at mid-July will likely be weak at 0.8 per cent, compared to 1.2 per cent growth in the first quarter, as manufacturing contracts and services growth slows.

The economists noted that manufacturing has contracted 1.2 per cent in the April to May period versus 0.4 per cent in the first quarter.

"We expect manufacturing to remain in contraction in June," they said. "Construction, which accounts for about 4 per cent of GDP (gross domestic product), will remain healthy, but this will not be sufficient to offset the manufacturing and services downturn."

With additional information from The Straits Times.