Singapore's decade-low growth triggers recession warning

Reuters SINGAPORE | Updated on July 12, 2019 Published on July 12, 2019

This is the biggest on-quarter contraction in almost 7 years


Singapore's economy grew at its slowest annual pace in a decade in the second quarter, preliminary data showed on Friday, raising bets that a technical recession and monetary policy easing could be just around the corner. The quarter's 0.1% gross domestic product (GDP) expansion was below the 1.1% forecast in a Reuters poll and the slowest annual growth since 2009's second quarter, when it fell 1.2%.

The Trade Ministry also said the economy shrank 3.4% on a seasonally adjusted and annualised basis - the biggest contraction in nearly seven years compared with a poll forecast of 0.1% growth and January-March's 3.8% expansion. “It is quite disastrous ... way below even the worst street forecasts,” said Selena Ling, head of treasury and strategy at OCBC Bank.


The slump in Singapore - often seen as a bellwether for the health of the global economy - is the latest evidence that momentum has slowed across Asia as the year-long U.S.-China trade war and sliding growth weigh on the region's export-reliant economies. Elsewhere in Asia, analysts say South Korea may also be flirting with recession, while China on Monday is expected to report its slowest economic growth in at least 27 years.

Ling and others say the main drag for Singapore remains the manufacturing sector. In the second quarter, manufacturing contracted 3.8% from a year earlier after shrinking 0.4% in the quarter earlier. Singapore authorities have previously said they will review their 2019 full-year GDP growth of 1.5%-2.5%, and some analysts say there might be a recession in 2020. The standard technical definition of a recession is two consecutive quarters of economic contraction.

Ling said she expects authorities to soon lower their full-year growth forecast to 0.5-1.5%. Singapore's Finance Minister said in a Facebook post on Friday the government was not expecting the economy to slip into ”a full-year recession”. Electronics manufacturing output, the main driver of Singapore's economy in the last two years, declined for the sixth consecutive month in May while exports saw their biggest decline in more than three years.


Khoon Goh of ANZ, who described Singapore's economy as at a ”stand-still” in the second quarter, said in a note that with global trade “still reeling” from trade tensions and a broader global slowdown, downside growth risks remained. In a Reuters poll done after the release of the Q2 data, seven of 11 economists said they expected the Monetary Authority of Singapore to loosen its exchange-rate monetary policy in its next policy statement, due in October, with the other four forecasting no change.

“There was a one-in-four chance previously that the MAS will ease,” said Jeff Ng of Continuum Economics, who forecast no change. “Now, it has increased to 40% that they will ease on or before October.” ANZ's note, headlined “We now expect MAS to ease in October”, said it anticipated the central bank would reduce the slope of its policy band slightly to 0.5% per annum from 1.0%.

Published on July 12, 2019
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