Singapore was able to veer away from a technical recession as its economy grew by 0.1% in the 3rd quarter, the Ministry of Trade and Industry announced Monday (Oct 14).
However, the growth was below the 0.3% that was foreseen by economists in a previous Reuters poll.
According to the data, the manufacturing sector contracted by 3.5% on a year-on-year basis in the third quarter, 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 the other hand, 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.
The services producing industries also expanded by 0.9% year-on-year in the third quarter, following the 1.1% growth in the previous quarter.
Based on MTI statements, “Growth during the quarter was primarily supported by the finance and insurance sector, the other services industries and the business services sector.”
In a separate announcement on Monday morning, the Monetary Authority of Singapore said it is reducing the pace of the Singapore dollar’s appreciation “slightly” in line with market expectations amid a slowing in the Singapore economy.
Mr Alex Holmes from research firm Capital Economics said: “Looking ahead, we expect the economy to remain very weak.
“While fiscal and monetary loosening should help, external headwinds from the US-China trade war and slowing global growth are likely to weigh heavily on growth prospects,” he added.
Mr Holmes expects the Singapore economy to grow just 0.5% this year and 1.5% in 2020.
Also expecting growth for the full year to come in at around 0.5%, Mizuho’s Head of Economics and Strategy Vishnu Varathan noted that the economy is far from being out of the woods.
The key manufacturing sector, for instance, has logged its fourth straight quarter of quarter-on-quarter contraction.
“Worryingly, this is not a garden-variety cyclical exports or manufacturing downturn, typically easier to get over. Instead, the downturn is complicated by an earlier semiconductor down-cycle colliding with the US-China trade conflict,” he wrote in a note.
“What’s more, not only is a recovery or bottoming compromised by negative shocks from US-China trade conflict, but a spillover tech war waged on China risks a double dip in electronics.”
With a US-China trade deal “far from a given”, Mr Varathan said the Singapore economy is “left on a knife’s edge”. -/TISG