Singapore

S’pore barely avoids technical recession

Economy grew 0.6 per cent in Q3, avoiding two consecutive quarters of decline

Singapore has narrowly avoided a technical recession in the third quarter according to flash estimates by the Ministry of Trade and Industry (MTI) yesterday, but economists say robust policy response will still be needed to "lift the boat" given the choppy outlook.

The Monetary Authority of Singapore (MAS) has eased the Singdollar's rate of appreciation as well, leaving room for further easing should prospects for inflation and growth weaken significantly.

The Republic's economy grew by 0.1 per cent from a year ago, at the same pace it did in the second quarter, dragged down by manufacturing which had its weakest showing since 2005.

On a quarterly basis, growth was 0.6 per cent, reversing a 2.7 per cent contraction in the previous quarter.

Two consecutive quarters of negative quarterly growth would have marked a technical recession for Singapore's economy, which is seen as a bellwether for global demand given its reliance on foreign trade.

Still, the mood remains cautious.

DBS senior economist Irvin Seah said: "Growth may have bottomed but the improvement ahead could be weak."

The trade war, the prospect of Brexit and China's slowdown all pose significant challenges.

"What would be required to turn the receding global economic tide would be a robust and synchronised fiscal boost across the region," he said.

"Policymakers are beginning to roll out expansionary fiscal policies (and) we expect the Singapore authorities to do so likewise in the upcoming budget next year."

Amid the trade war, manufacturing contracted by 3.5 per cent, shrinking for a third consecutive quarter.

Ms Selena Ling, head of treasury research and strategy at OCBC Bank, pointed out that the partial trade deal between the US and China "does not cover Huawei or other Chinese companies in the US entity list, which suggests any near-term market optimism about the tech sector regaining its momentum may be disappointed".

"The electronics and supporting industries should still see persistent weakness over the near term," she said, while flagging a more disconcerting fact that the services sector has continued to soften in growth momentum.

The services producing industries expanded by 0.9 per cent year-on-year in the third quarter, slower than 1.1 per cent previously.

The construction sector grew by 2.7 per cent.

Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye were less downbeat.

"The possibility of a more substantial agreement is rising as US President Donald Trump is coming under greater pressure to seal a deal in the lead-up to US elections in November 2020," they said.

The MAS said it expects Singapore's growth, which slowed over the first three quarters, to pick up modestly in 2020, subject to considerable uncertainty in the external environment.

It anticipates global growth to stabilise in 2020, barring further shocks.

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