© Reuters. PHOTO FILE: Container cranes are photographed in the port of Singapore
By Fathin Ungku and John Geddie
SINGAPORE (Reuters) – Singapore on Friday released gloomy data on second-quarter growth, including the slowest annual pace of growth in a decade, suggesting a recession and a slowdown. easing of monetary policy.
The 0.1% increase in gross domestic product (GDP) recorded during the quarter was lower than the 1.1% forecast in a Reuters poll and the lowest annual growth since the second quarter of 2009, while she had dropped 1.2%.
The Ministry of Commerce also said the economy was down 3.4% on an annualized and seasonally adjusted basis – the biggest contraction in nearly seven years compared to a 0.1% growth forecast and 3.8% in January-March.
"It's quite disastrous (…) far below the worst predictions on the streets," said Selena Ling, head of finance and strategy at OCBC Bank.
The recession in Singapore – often seen as an indicator of the health of the global economy – is the latest evidence of slowing momentum in Asia as the US-China trade war and speed is weighing on the region's economies that depend on exports.
Elsewhere in Asia, analysts believe that South Korea could also flirt with the recession, while China is expected Monday to announce its slowest economic growth in at least 27 years.
Ling and others claim that the main drag on Singapore remains the manufacturing sector.
In the second quarter, the manufacturing sector fell 3.8% from the previous year, following a contraction of 0.4% in the previous quarter.
The Singaporean authorities had previously announced that they would examine their annual GDP growth rate between 1.5% and 2.5% in 2019, and some analysts believe that there could be a recession in 2020.
The standard technical definition of a recession is two consecutive months of economic contraction.
Ling said she expected the authorities to soon lower their growth forecasts for the whole of the year to 0.5-1.5%.
The output of the electronics manufacturing sector, the main engine of Singapore's economy over the past two years, declined for the sixth consecutive month in May, while exports experienced their largest decline in more three years.
Khoon Goh of ANZ, who described Singapore's economy as being "stalled" in the second quarter, said in a note that global trade is "still under tension" with trade tensions and that the global slowdown is widespread, downside growth risks remain.
The disappointing second-quarter figures prompted more economists to wait for the Monetary Authority of Singapore, the central bank, to ease its exchange-rate-based monetary policy in its next statement. policy, scheduled for October.
"There was a one-in-four chance of the MAS softening, now it has risen to 40% by the month of October," said Jeff Ng of Continuum Economics at Reuters.
The ANZ rating was titled "We expect MAS to soften in October" and to reduce the slope of its policy range from 1.0% to 0.5%. % per year.
ING said the central bank could arrive before October.
"The current data suggests that waiting would put the economy at risk more than necessary, so an impending move seems likely," he said in a note.
MAS tightened its monetary policy twice last year to control increasing price pressures and strengthen its currency. This is the first tightening measure of its kind in six years.
The Singaporean dollar