As the world’s economy takes a deeper dive as it prepares for a looming recession, Singapore’s second-quarter data released on Friday (12 July) showed a dreadful slowdown.
According to official estimates released by the Ministry of Trade and Industry (MTI), the Republic’s year-on-year gross domestic product (GDP) growth only grew by a scant of 0.1% in the second quarter. This is the lowest figure the country has recorded since the 2009 Great Recession when the economy shrank by 1.2%.
If that is not all, the figure is also drastically lower that the mere 1.1% expansion in the first quarter of the year, which was revised downwards by a tiny percentage from an earlier figure of 1.2%.
The latest data, according to preliminary numbers from April and May, was way below that the median estimate of 1% growth predicted by private economists in a Bloomberg poll.
After a disappointing first-quarter data, MTI cut its full-year forecast in May to between 1.5% and 2.5%. Previously, it expected the growth to reach up to 3.5%.
Since the end of 2018, year-on-year GDP growth has dropped to figures that were last seen a decade ago during the Great Recession.
On a quarter-on-quarter seasonally-adjusted annualised basis, the economy shrank by 3.4%, after posting growth of 3.8% in the preceding quarter. Singapore last recorded a quarter-on-quarter dip in end-2018, when it saw a slight decline of 0.8%.
Based on the data, manufacturing, which takes up about one-fifth of the economy, extended a 0.4% decline in Q1 to contract by a much wider 3.8% between April and June on a year-on-year basis.
The contraction was due to output declines in the electronics and precision engineering clusters which more than offset output expansions in the rest of the manufacturing clusters, MTI noted.
Thankfully, the construction sector saw a positive light as it grew slightly, due to an increase in public sector construction activities. Growth went up by 2.2% on a year-on-year basis, extending the 2.7% expansion in the previous quarter.
As for the services-producing industries, it expanded by 1.2% on a year-on-year basis in Q2, unchanged from Q1, supported primarily by the finance and insurance, “other service industries”, and information and communication sectors, MTI explained.
Looking at the country’s poor GDP performance in the second quarter, Maybank Kim Eng analysts Chua Hak Bin and Lee Ju Ye said in a report that they expect “a shallow technical recession in the third quarter” due to the continued absence of a US-China trade deal.
On top of that, the market is also not convinced that there will be prospects of a second-half recovery.
However, other economists have raised objections over Maybank Kim Eng’s prediction.
“On balance, leading indicators point to subdued growth, rather than technical recession in (the third quarter),” said Citi’s Kit Wei Zheng and Ang Kai Wei on July 3, although they admit that “risks are clearly tilted to the downside”.
“More importantly, we suspect a recession, if it were to happen, would likely be concentrated in manufacturing and other trade-related services, rather than broad-based,” they noted.