The Singapore economy narrowly escapes technical recession as it grew 0.1% on a year-on-year basis in the third quarter of 2019, based on flash estimates from the Ministry of Trade and Industry (MTI) released on Monday (14 October).
This figure is lesser than 0.3% growth estimated by economists in a Reuters poll, but remains the same with the 0.1% growth in Q2, which is the lowest since the 2009 Great Recession.
If we were to look at the city-state’s quarter-on-quarter seasonally-adjusted annualised basis, gross domestic product (GDP) went up by 0.6%, avoiding the technical recession that occurred on two straight quarters of quarter-on-quarter decline.
In the previous quarter, the economy dropped by 2.7% since the figure was revised higher than an earlier print of 3.3% contraction.
According to the data, the manufacturing sector continued to decline as it contracted by 3.5% on a year-on-year basis in Q3, extending the 3.3% decline in the previous quarter.
“The contraction was due to output declines in the electronics, precision engineering and transport engineering clusters, which more than offset output expansions in the chemicals, biomedical manufacturing and general manufacturing clusters,” said MTI.
On a quarter-on-quarter seasonally-adjusted annualised basis, the manufacturing sector shrank by 0.4%, moderating from the 4.2% contraction in the preceding quarter.
However, the construction sector grew by 2.7% on a year-on-year basis in the third quarter, extending the 2.8% expansion in the previous quarter.
MTI noted that the growth is due to “a pickup in both public and private sector construction activities”.
On a quarter-on-quarter seasonally adjusted annualised basis, the sector contracted by 1.1%, a slower pace of decline as compared with the 5.3% contraction in the second quarter.
As for the service producing industries, it expanded by 0.9% on a year-on-year basis in the third quarter, following the 1.1% growth previously.
“Growth during the quarter was primarily supported by the finance and insurance sector, the other service industries and the business services sector,” the ministry explained.
However, the data showed that the trade-related services sectors like wholesale trade were brought down by weak external demand and negative spillovers from the downturn in electronics and precision engineering clusters.
On a quarter-on-quarter seasonally-adjusted annualised basis, the services producing industries grew by 0.7%, a reversal from the 1.4% decline in the preceding quarter.
While expecting a slow improvement next year, the central bank mentioned in a policy decision on Monday that it had decided to reduce slightly Singapore dollar’s appreciation rate.
The Monetary Authority of Singapore (MAS) said: “Growth in the Singapore economy has slowed over the first three quarters of the year. It is expected to pick up modestly in 2020, although this projection is subject to considerable uncertainty in the external environment. Core inflation has come in lower than anticipated in recent months, and will remain subdued in the year ahead.”
It added that “the weakness in electronics production and its supporting industries in Singapore is like to persist over the near term” and “the finance & insurance and information & communications services sectors should continue to expand, underpinned by domestic demand in the region and ongoing digitalization-related investments”.
Meanwhile, the outlook for the “retail industry has dimmed but growth in education, health and social services is expected to stay resilient”. As for the construction sector, MAS said that it should also improve by next year, given the strong pipeline of public infrastructure projects.