The final second quarter economic growth data of Singapore released today morning remained the same from the advance report of only 0.1 percent year-on-year. The contraction in the manufacturing sector was revised to -3.1 percent year-on-year from -3.8 percent; however, this was countered by softer figures for services and the construction sector.
This suggests only 0.6 percent growth in the first half of 2019 and the big picture is that the government downgraded the outlook for 2019 for the second time to only 0-1 percent from 1.5 to 2.5 percent previously. It expects growth to be around the mid-point of this range, about 0.5 percent that suggests -0.6 percent to 1.4 percent growth in the second half of 2019.
“We could see another quarterly contraction in Q3 following -3.3 percent qoq annualized in Q2. This will imply a technical recession and first since 2008. The downturn is unlikely to be as severe as in 2008 when growth contracted nearly 8 percent yoy in Q1 2009 but at the same time, the rebound is also unlikely to be robust”, said Commerzbank in a research report.
The outlook is challenging even into 2020 given the continued rebound in the electronics sector, lingering trade tensions, and the uncertain regional outlook.
MAS is likely to ease policy during its next policy meeting in October. MAS is expected to adopt an easing bias for the SGD nominal effective exchange rate. The odds of a more aggressive easing are on the cards and this entails a one-off depreciation in the SGD NEER, stated Commerzbank.