Singaporean economic growth data for the second quarter is set to release tomorrow. According to a DBS Bank research report, the economy is likely to have grown 1.3 percent year-on-year in the June quarter and 1.4 percent quarter-on-quarter.
The recovery that was anticipated after the sharp fall in the fourth quarter of 2018 seems to have been softer than previously thought. Furthermore, the manufacturing sector is already in a technical recession. It has already seen two straight quarters of sequential fall. Another quarter of disappointment from the sector, which is likely judging from the hostile external environment and soft global demand, would increase the risk of the sector falling into an outright recession.
While the services sector might have possibly picked up some of the slack from manufacturing, it is also under tremendous pressure. There are negative spillovers from manufacturing to services, and the externally oriented services clusters are also struggling in the midst of soft external demand.
The construction sector is performing well, owing to a sound project pipeline, but its growth contribution is restricted by its relatively smaller GDP share. Indeed, uncertainties continue to be even after the U.S. and China have resumed the trade negotiation.
“More specifically, while a technical recession for the overall economy is not yet a given, the risk is rising given the external headwinds. Taking these risks into account and given a potentially weak outcome for 2Q19 figures, we may be compelled to lower our full year GDP growth forecast at some point in time”, added DBS.