Singapore avoided a technical recession in 2Q, yet it still not out of the wood

Singapore’s economy avoided a technical recession in the second quarter of 2023 (2Q’23), according to BMI, a Fitch Solutions company.

Its research showed Singapore’s output rebounded to a seasonally-adjusted 0.3% quarter-on-quarter (q-o-q), partially reversing the 0.4% contraction in the first quarter of 2023 (1Q’23).

The latest figure exceeded consensus expectations of a 0.2% q-o-q decline. In year-on-year (y-o-y) terms, growth picked up from 0.4% in 1Q to 0.7% in 2Q.

In spite of this, it is difficult for the economy to achieve 2.2% y-o-y growth in the second half of 2023 due to weak global demand and that the Singapore’s monetary policy settings remain tight.

The research house projected the global growth to slow to a mere 2.2% this year, signaling unfavorable prospects for Singapore’s export-oriented economy.

“Although the Monetary Authority of Singapore decided to leave policy settings unchanged at its latest meeting in April, that came only after five consecutive rounds of tightening.

“The impact on the economy has probably yet to fully run its course. With all that said, the underlying data also point to pockets of strength within the economy,” it said in a statement today.

The research arm said the breakdown of the latest gross domestic product (GDP) data showed that Singapore’s manufacturing sector remains weak.

“The sector contracted by a further 1.3% q-o-q in seasonally-adjusted terms, which is equivalent to a 7.5% y-o-y decline in output.

“This underscores the ongoing impact of weak global demand on Singapore’s key manufacturing exports,” it said, adding that the majority of other sectors showed improvement.

Notably, the construction sector grew from 0.3% q-o-q in 1Q to 2.6% q-o-q in 2Q, while, services sector increased from 0.4% to 1.3%.