Singapore avoids recession in Q3, says poll; expansionary election-year budget to add further boost

Singapore assets under management growth declines year-on-year
Monetary Authority of Singapore (MAS) Reuters

Singapore's economy has averted a technical recession in the third quarter, amid fears of sluggish growth and tepid inflation, a new Reuters poll has shown.

The poll of 11 economists shows that gross domestic product (GDP) may have increased 1.5 percent on a quarter-on-quarter, seasonally adjusted basis in July-September.

"Third-quarter GDP is expected to stay weak and narrowly dodge a technical recession ... Manufacturing will likely remain in recession, while services will be supported by the financial sector, tourism-related services and business services," said ," said Lee Ju Ye, an economist with Maybank Kim Eng, according to Reuters.

There have been reports that the Monetary Authority of Singapore (MAS) was likely to ease its exchange-rate based monetary policy at semi-annual meeting scheduled for later this month in view of sluggish growth.

Singapore's economic growth had slowed sharply after the MAS moved out of the neutral stance last April and went for its policy first tightening move in six years.

"We currently think the slope is at a 1 per cent appreciation stance and they will bring it down to 0.5 per cent," Maybank economist Lee Ju Ye said ahead of the MAS meeting, according to Channel News Asia.

"We view the risks to our call as tilted towards a more aggressive 100-basis-point slope reduction to zero per cent in October, rather than no easing at all, especially with industrial production plummeting," added Barclays economist Brian Tan.

If Singapore's economy registers 1.5 percent growth in the July-September quarter, that would mark a sharp recovery from the 3.3 percent drop in the second quarter, which was the biggest contraction recorded in seven years.

Hit hard by worsening China-US trade war

Export-dependent Singapore economy was hit hard by the worsening China-US trade war and a consequent dampening of global demand. Singapore's manufacturing sector was significantly impacted and corporate profits have taken a battering, the poll added.

The report also says that the prospect of a generous budget Singapore may unveil ahead of the election year will shore up the flagging economy.