Singapore economy seen shrinking in Q2 as two sectors struggle

Expected contraction: A recent picture of the Port of Singapore with the city in the background. Singapore’s economy is expected to have contracted almost 3% in the second quarter, a slight improvement from advance estimates but reaffirming the risk of a possible recession as the trade and manufacturing sectors struggle. — Bloomberg

SINGAPORE: Singapore’s economy is expected to have contracted almost 3% in the second quarter, a slight improvement from advance estimates but reaffirming the risk of a possible recession as the trade and manufacturing sectors struggle.

Final gross domestic product is forecast to have fallen 2.9% on a seasonally adjusted and annualised quarter-on-quarter basis, a Reuters poll showed.

That is smaller than the 3.4% contraction forecast by the government but well below the first quarter’s 3.8% growth.

It would be the latest in a string of bad indicators for Singapore, often seen as a bellwether for global growth as international trade dwarfs its domestic economy.

“Given weak recent trends in industrial production, non-oil domestic exports and retail sales, I see little room for optimism, ” said Steve Cochrane, Moody’s Analytics Asia-Pacific chief economist.

“My best guess then, is for the data to remain largely unchanged.”

Moody’s Analytics said in a note yesterday that the chance of a global recession over the next 12-18 months had increased to 50% from 40%.

A raft of Asian banks including in New Zealand, India and Thailand cut interest rates this week, signalling major concerns about the outlook for economic growth. Last month, the US Federal Reserve cut interest rates for the first time since 2008.

Singapore’s central bank is widely expected to ease policy when it meets for the second of its semi-annual policy announcements in October, if not in an off-cycle move beforehand.

From a year earlier, Singapore’s economy is expected to have expanded 0.2% in the second quarter, its slowest pace in a decade, the median forecast in the poll of 11 economists showed. That is slightly higher than the government’s advance estimate of 0.1% but well below 1.1% in the first-quarter.

In a note titled “a recession is coming”, Credit Suisse analysts said this week that sharp declines in Singapore’s core electronics manufacturing sector are expected to outweigh any strength in the construction and services sector.

“We expect 3Q19 to show a further sequential decline, driving a technical recession, ” the analysts said, forecasting on-year growth of just 0.5% in 2019, well below government estimates of 1.5%-2.5%. -— Reuters