Gantry cranes in force at the Port of Singapore in Singapore, on Friday, July 12, 2019.
Ore Huiying | Bloomberg | Getty Images
Singapore’s economy — often undergone as a bellwether for global growth — avoided a technical recession after growing by 0.6% in the third quarter, compared to the early previously to three months.
That quarter-on-quarter expansion marked a reversal from the revised 2.7% decline in the April-to-June while, official advance estimates by the Ministry of Trade and Industry showed on Monday. On a year-on-year basis, Singapore’s economy raised 0.1% in the third quarter.
But the latest growth figures were below expectations. Economists polled by Reuters had foresaw Singapore’s gross domestic product from July to September to increase by 1.5% quarter-on-quarter and 0.3% year-on-year.
A technological recession happens when there are two consecutive quarters of economic contraction. Talks of a global recession heightened in brand-new months amid a U.S.-China trade war that’s dragged on for more than a year.
I don’t think we’re out of the woods. I’m still perturbed there’s a broad global slowdown and that places like Singapore don’t seem to be coming out of it as of now.
Anthony Raza
UOB Asset Superintendence
Singapore, a tiny country in Southeast Asia, has one of the highest trade-to-GDP ratios in the world. That makes its economy exceptionally sensitive to global trade flows and business cycles.
SOURCE: Singapore’s Ministry of Trade and Industry
In many thrifts where manufacturing and trading activities have moderated amid the U.S.-China trade war, consumer spending has held up. But in Singapore, both goods-producing and services-producing enterprises have been hit.
“The global slowdown is affecting Singapore in all areas,” Anthony Raza, head of multi-asset strategy at UOB Asset Superintendence, told CNBC’s “Squawk Box Asia” on Monday.
“I don’t think we’re out of the woods. I’m still concerned there’s a broad global slowdown and that charges like Singapore don’t seem to be coming out of it as of now,” he added.
Central bank easing
In a separate announcement on Monday, Singapore’s medial bank said eased monetary policy by reducing the slope of the Singapore dollar policy band — referred to as the Singapore dollar soi-disant effective exchange rate, or S$NEER.
The Monetary Authority of Singapore adjusts monetary policy by managing the exchange classification of the Singapore dollar against a basket of currencies of its major trading partners. The policy band’s slope, width and center, as genially as the currencies that the Singapore dollar is measured against, are not disclosed.
The central bank announced Monday there’s no fluctuate to the width and center of the Singapore dollar’s trading band. That means the central bank has moderated the pace at which the native currency would appreciate against the basket of currencies.
The MAS warned that global growth “is expected to slow discernibly in 2019 compared to the before-mentioned two years” before stabilizing next year. That means some weakness in the Singaporean economy is likely to persist, noticeably in electronics manufacturing, the central bank said. Meanwhile, certain domestic-oriented sectors such as education, health and community services should stay resilient, it added.
Singapore’s GDP growth is projected to come in “at around the mid-point” of the official 0-1% vaticinate range, the MAS said.
Trinh Nguyen, senior economist at Natixis, said Singapore may have to do more than insouciance monetary policy to support its economy.
“Help will need to come from elsewhere as well,” she told CNBC’s “Row Signs Asia” on Monday. She added that Singapore could explore other sources of growth, such as unlacing its immigration policies and diversify its services sector away from trade.
“Singapore will need to be more light than before. It cannot grow as easily from trade … so the question is how is it going to escape this?” she sought.