Singapore's decade-low growth triggers recession warning

13 Juillet, 2019, 01:10 | Auteur: Auguste Feret
  • Flash estimates by the Ministry of Trade and Industry pegged Singapore's economic growth at 0.1 per cent in the second quarter this year

The slump in Singapore - often seen as a bellwether for the health of the global economy - is the latest evidence that momentum has slowed across Asia as the year-long United States-China trade war and sliding growth weigh on the region's export-reliant economies.

The city-state's gross domestic product shrank an annualised 3.4 percent, sharply down from 3.8 percent growth in the first three months of the year and well off forecasts of a slight expansion.

On a year-on-year basis, it expanded just 0.1 percent, the trade ministry said, marking the slowest rate since the global the global financial crisis in 2009 and also well short of estimates.

Khoon Goh of ANZ, who described Singapore's economy as being at a "stand-still" in the second quarter, said in a note that with global trade "still reeling" from trade tensions and broader global slowdown, downside growth risks remain.

With Singapore reporting on Friday (July 12) a surprise economic contraction, Law Minister K. Shanmugam said earlier this week that an upheaval in trade and the impact on the economy could be among the top concerns of its citizens.

In the second quarter, manufacturing contracted 3.8% from a year earlier after shrinking 0.4% in the quarter earlier.

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Some analysts are now betting Singapore could slip into a technical recession - two straight quarters of economic contraction - in 2020.

The disappointing Q2 figures have more economists expecting that the Monetary Authority of Singapore, the central bank will ease its exchange-rate based monetary policy in its next policy statement, due in October.

For the past year, China and the USA have been raising tariffs on each other's exports in an increasingly bitter trade war that is weighing on the global economy and markets.

"There was a one-in-four chance previously that the MAS will ease", said Jeff Ng of Continuum Economics, who forecast no change. "Now, it has increased to 40% that they will ease on or before October".

ANZ's note was headlined "We now expect MAS to ease in October", and said it expects MAS to reduce the slope of its policy band slightly to 0.5 percent per annum from 1.0 percent. An imminent move, therefore, looks probable.

FILE PHOTO: Passers-by hold their mobile phones as people take a selfie photo using a smartphone, with Singapore's central business district skyline, in Singapore, May 10, 2019.

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