Singapore Q2 GDP growth comes in flat, far below expectations: flash data

SINGAPORE’S full-year economic forecast could be cut again, amid market fears of a looming recession, as second-quarter flash data out on Friday showed a much deeper slowdown than had been feared.

In the latest whammy to predictions, year-on-year gross domestic product (GDP) growth looks set to ease to a flattish 0.1 per cent in the second quarter of 2019. This is the slowest quarterly growth since the throes of the Great Recession in mid-2009, when the economy shrank by 1.2 per cent.

It is also sharply cooler than the 1.1 per cent expansion in the first three months, which was revised downwards by a smidgen from an earlier figure of 1.2 per cent.

The latest figure, based on preliminary numbers from April and May, came in well under the median estimate of 1 per cent growth put forward by private economists in a Bloomberg poll.

The Ministry of Trade and Industry (MTI) cut its full-year forecast in May, to between 1.5 per cent and 2.5 per cent, after first-quarter data disappointed. It previously guided for growth of up to 3.5 per cent.

Since late 2018, year-on-year GDP growth has cooled to levels last seen during the Great Recession.

On a seasonally adjusted, quarterly basis, second-quarter GDP shrank by 3.4 per cent, compared with 3.8 per cent expansion in the first quarter. The Republic last clocked a quarter-on-quarter dip in end-2018, when it saw a mild decline of 0.8 per cent.

Maybank Kim Eng analysts Chua Hak Bin and Lee Ju Ye recently raised the spectre of recession - referring to two straight quarters of quarter-on-quarter contraction - in a June 26 report. They expect “a shallow technical recession in the third quarter” on the continued absence of a US-China trade deal.

The market is also less certain about the prospects of a second-half recovery. Still, other economists have demurred over Maybank Kim Eng’s bearish projection.

“On balance, leading indicators point to subdued growth, rather than technical recession in (the third quarter),” said Citi’s Kit Wei Zheng and Ang Kai Wei on July 3, even as they acknowledged that “risks are clearly tilted to the downside”.

“More importantly, we suspect a recession, if it were to happen, would likely be concentrated in manufacturing and other trade-related services, rather than broad-based.”

Meanwhile, Barnabas Gan, from United Overseas Bank, said that recession “remains unlikely”.

“We see little risk of a technical recession in 2019, given our expectation for growth to stabilise in the third quarter before picking up into the fourth quarter,” he wrote on July 5.

The powerhouse manufacturing sector has led the economic decline, shrinking for the second straight quarter. It saw a year-on-year decline of 3.8 per cent, widening from the 0.4 per cent dip in the quarter before, with the MTI attributing the contraction to lower electronic and precision engineering output.

Still, the quarter-on-quarter, seasonally adjusted decline in manufacturing eased to 6 per cent, an improvement from the 6.4 per cent drop previously.

Meanwhile, the construction sector continued its year-on-year recovery with growth of 2.2 per cent in the second quarter - after clocking 2.7 per cent expansion before - on a rise in public works. But, on a quarterly basis, the sector was still down by 7.6 per cent, reversing the earlier double-digit growth.

Services growth was unchanged at 1.2 per cent, which the MTI said “was supported primarily by the finance and insurance, other services industries, and information and communications sectors”. On a quarterly basis, though, the services sector shrank by 1.5 per cent, which was also a turnaround from growth of 4.4 per cent in the quarter prior.

An updated second-quarter GDP print is due by Aug 23, when the MTI will give a fresh prognostication.