The Republic’s economy shrank in the second quarter as a global slowdown undermined demand for the city-state’s exports, the Trade and Industry Ministry said this morning.
Gross domestic product contracted at a seasonally-adjusted, annualised rate of 1.1 per cent in the April to June period from the previous quarter, when it expanded 9.4 per cent, the ministry said.
Manufacturing in the second quarter dropped 6 per cent, reversing from 20.9-per-cent growth in the first quarter. The drop “largely reflected the decline in biomedical manufacturing output, which more than offset gains in the transport engineering cluster”, the Ministry of Trade and Industry said.
Services grew just 0.4 per cent and construction 0.3 per cent.
Singapore relies on trade, finance and tourism to fuel one of the richest living standards in the world. The government expects the economy to grow as little as 1 per cent this year, down from 4.9 per cent growth last year.
The economy expanded 1.9 per cent in the second quarter from the same period a year earlier, up slightly from 1.4 per cent growth in the first quarter.
Economists surveyed by Reuters had given a consensus forecast of second-quarter growth of 0.3 per cent quarter-on-quarter and 2.4 per cent year-on-year.
“The growth momentum has clearly come off due to the softening of industrial production and non-oil domestic exports so far this year,” economist Aninda Mitra at Australia & New Zealand Banking Group said before the report.
“What may help Singapore is not so much government support but a pick-up in Chinese growth in the second half as its recent monetary easing and fiscal spending starts to take effect.”
However, Chua Hak Bin, Economist at Bank of America-Merrill Lynch, disagreed on China, saying: “Most China forecasters are looking for a bounce in the second half. I suspect that the bounce may be muted.”
He added: “There is a risk of a technical recession. Some of the numbers coming out of Europe, the US and China as well have been on the downside so we can’t rule out that risk.”
Added Ms Selena Ling, economist at Oversea-Chinese Banking Corp: “Singapore is one of the more open, export-driven economies in Asia so people will take these numbers as a cue. The big question is still China. If we get a strong number, that will mitigate some of the concerns. But we suspect not.
“The risk of a technical recession cannot be ruled out. The service engine is faltering for Singapore.”
The GDP results released Friday were preliminary data mostly from April and May, the ministry said. The ministry is scheduled to release more comprehensive results about the second-quarter economy next month.