Singapore economy grows 0.1% in Q2, slowest since 2008 financial crisis

SINGAPORE —  The Singapore economy grew by 0.1 per cent year on year from April to June, recording the worst quarterly result since the global financial crisis of 2008, flash estimates released by the Ministry of Trade and Industry showed on Friday (July 12).

This was well below the 1.1 per cent growth in the previous quarter, as the bite of the US-China trade war is increasingly felt by Singapore's small and open economy, particularly in the manufacturing industry which shrank for the second straight quarter by 3.8 per cent.

The services and construction industries both posted year on year growth of 1.2 per cent and 2.2 per cent respectively, but was not enough to fully offset the decline in manufacturing.

The full result for the second quarter will be released in August, but banks are already adjusting their forecasts downwards in the light of the advance data. Economists had expected the second quarter to grow by 1.1 per cent, according to a consensus poll by Bloomberg.

MTI's own Gross Domestic Product (GDP) forecast for 2019 is between 1.5 per cent to 2.5 per cent, but with both quarters in the first half of the year performing under this band and with no sign of improvement in the global economic outlook soon, analysts say policymakers will likely downgrade their annual prediction in August.

Analysts in recent months have predicted that the Singapore economy may possibly sink into a technical recession should trade tensions grow worse. 

On a quarter-on-quarter basis, the economy in April to June contracted by 3.4 per cent, down from the 3.8 per cent growth from January to March this year, the latest MTI data showed. A technical recession is marked by two consecutive quarter-on-quarter declines.

Referring to the latest result as “a near stall”, OCBC head of treasury research and strategy Selena Ling said: “This brought the first half of 2019 GDP growth to a paltry 0.6 per cent year on year, which is the weakest first half growth since 2009, and clearly heightens the risk of a technical recession if growth momentus remains tepid going into the third quarter.”

Ms Ling added that even with a US-China trade agreement materialising in the months ahead, it may not be sufficient to salvage Singapore’s domestic manufacturing performance. 

Mr Joseph Incalcaterra, HSBC Global Research’s chief Asean economist, said the weakness in Singapore’s GDP is “a harbinger of further growth deterioration across the region”.

Said Mr Incalcaterra: “What surprised us is how broad-based the deterioration was in Singapore, suggesting that unlike other neighboring economies, domestic-facing sectors are not strong enough to offset external headwinds.”

MTI said in a statement that the slump in manufacturing was due to output declines in the electronics and precision engineering clusters, which more than offset output expansions in the rest of the manufacturing clusters.

This corresponds with the sharp 15.9 per cent dive in Singapore's non-oil domestic exports in May, which was the worst in three years. A large part - around 30 per cent - of the country's factory output involve electronics.