SINGAPORE: The month of May saw the biggest fall in manufacturing output in Singapore since 2019, giving rise to fears of the economy slipping into a technical recession.
A technical recession is defined as two successive quarters of contraction. Singapore’s economy saw a 0.4 per cent decline in the first quarter of this year.
While economists in a Bloomberg survey in May had predicted a 7.3 drop in factory production, the actual decline was even greater, coming in at 10.8 per cent.
This is the first time that contraction has been in double digits since November 2019, when it fell by 12.3 per cent.
The electronics industry, which has the largest portion of the manufacturing sector (45 per cent), dropped 23 per cent from May last year.
Semiconductors saw the greatest decline of 26.8 per cent, computer peripherals and data storage fell by 26.6 per cent, and other electronic modules and components declined by 9.2 per cent.
In the manufacturing sector, only two clusters— transport engineering (28.4 per cent) and biomedical manufacturing (4.4 per cent)—saw a year on year increase.
The country’s industrial output may fall by as much as 3 per cent year on year, OCBC Bank chief economist Selena Ling quoted in The Straits Times as saying.
She added that the global electronics industry may not recover until later this year or early in 2024, especially for semiconductors.
“This would potentially mark the worst annual performance for Singapore’s industrial production since 2015 when it fell 5.1 per cent year on year,” Ms Ling said.
Barclays Plc and Maybank Research economists and those from other institutions now expect the country’s economy to contract in the second quarter, which would then be considered a technical recession.
Chua Hak Bin, a senior economist at Maybank, expects that the growth forecast of 0.5 to 2.5 per cent for the year could be downgraded due to contractions in the manufacturing sector, a June 27 Bloomberg report says. /TISG