Singapore dodges recession after slight progress in Q2 By Reuters

By Chen Lin

SINGAPORE (Reuters) -Singapore’s financial system narrowly escaped a recession within the second quarter as international demand weakened and China’s slowdown dragged on commerce flows, main some economists to chop their progress forecasts for the yr.

The Southeast Asian financial system grew a seasonally adjusted 0.3% quarter-on-quarter, following a 0.4% contraction within the first three months, preliminary authorities information confirmed on Friday. 4 economists with quarterly estimates had forecast progress of 0.3% in a Reuters ballot.

“I do not suppose we’re out of the woods fully. It’s nonetheless a half full half empty type of state of affairs” OCBC economist Selena Ling stated, including she expects the central financial institution to make no modifications to financial coverage in a scheduled overview in October.

She stated that whereas Singapore had escaped a technical recession for now, there was a chance that last GDP figures for the second quarter may very well be revised decrease attributable to latest indicators of softening progress in China.

China’s reopening had fuelled hopes for a sustained restoration in commerce and tourism for the area, particularly Singapore’s export-dependent financial system, however demand has weakened within the wake of upper rates of interest and powerful inflationary pressures.

On an annual foundation, the financial system expanded 0.7% within the second quarter, information from the Ministry of Commerce and Trade confirmed. That in contrast with 0.4% progress within the prior quarter and a 0.6% enlargement forecast in a Reuters ballot.

Barclays (LON:) economist Brian Tan stated it was providers exercise that led GDP again into enlargement, although barely. He lower his full-year forecast to 1.0% from 1.5%.

Tan expects the federal government to downgrade its forecast due to weak information up to now few months whereas the central financial institution maintains coverage.

Capital Economics stated in a observe the financial system stays weak and with inflation slowing, financial coverage will seemingly be loosened in October.

The ministry has projected GDP progress of 0.5% to 2.5% for this yr down from 3.6% in 2022.

In the meantime, the Singapore greenback and benchmark share index made small good points on Friday, extending sharp rises a day earlier as international markets rallied and the U.S. greenback fell.

In Might, the federal government stated it didn’t count on a technical recession – outlined as two consecutive quarters of contraction – this yr however acknowledged that the exterior demand outlook for the remainder of the yr had weakened.

Industrial output and exports have fallen for eight straight months, elevating the chance of a chronic downturn.

Singapore’s inflation had remained elevated within the first half of this yr, however authorities have stated core costs ought to average additional within the second half.

The Financial Authority of Singapore left its coverage settings unchanged in April, after tightening 5 instances in a row since October 2021, reflecting issues over the city-state’s progress outlook.