Singapore barely avoids technical recession

This article is more than 12 months old

S'pore economy expands just 2.5%, short of expected 2.7% growth

Singapore's economy grew more slowly than expected in the second quarter but managed to avoid a technical recession.

The numbers hint at more uncertainty. Economists warned that growth is likely to ease further in this half of the year and noted that performances across sectors remain uneven.

The economy expanded 2.5 per cent in the April-to-June quarter, showed Ministry of Trade and Industry advance estimates released yesterday. This fell short of expectations of 2.7 per cent growth.

Compared with the previous three months, the economy grew 0.4 per cent. This came after a 1.9 per cent quarter-on-quarter contraction in the first three months of the year.

This meant Singapore just managed to avoid a technical recession, defined as two consecutive quarters of decline in economic output.

The manufacturing sector was again the key growth driver, thanks to a global export rally that lifted demand for Singapore's shipments of semiconductors and related equipment.

Manufacturing grew 8 per cent from the same quarter a year earlier, extending the 8.5 per cent growth in the previous three months. Growth was supported by the electronics and precision engineering clusters.

OCBC Bank economist Selena Ling expects momentum in electronics manufacturing to remain robust "on the back of healthy semiconductor demand, especially in anticipating the launch of new products like the iPhone 8", though it remains to be seen if the other manufacturing industries like the biomedical cluster will step up.

Other economists, including United Overseas Bank's Mr Francis Tan, think factories could be hard-pressed to expand at a similar pace for the rest of the year.

"The semiconductor cycle may be peaking... (and) monthly industrial production numbers still point to an uneven recovery in this sector as weaknesses remain in the transport engineering, general manufacturing, biomedical manufacturing clusters," he noted.

Growth across the rest of the economy has also been uneven.

The construction sector shrank 5.6 per cent in the second quarter - its fourth straight month of contraction - weighed down by weakness in private and public sector building.

Services, which make up two-thirds of the economy, grew a tepid 1.7 per cent, slightly faster than the 1.4 per cent growth in the previous quarter.

Expansion was supported primarily by trade-related sectors, which benefited from stronger export demand.

Economists expect growth to slow in this half of the year as the global trade rally looks set to lose steam.

"While the advance estimates have fallen short of our expectation and we reckon that they will be revised upward, the latest set of figures is broadly consistent with our view that the pace of growth could be tepid going forward," said DBS senior economist Irvin Seah.