SINGAPORE - The Singapore economy grew a meagre 0.6 per cent in the July to September period compared with a year ago, according to advance estimates from the Ministry of Trade and Industry (MTI).
This was sharply lower than economists' estimates of 1.7 per cent growth.
Compared to the previous quarter, the economy contracted by 4.1 per cent, the biggest slump since 2012.
This is what some economists are saying about the lacklustre numbers.
DBS Group Research:
"GDP fell by 4.1 per cent quarter-on-quarter in the third quarter, far more sharply than anticipated. Additionally, second quarter growth was revised down. With these outcomes, (third quarter growth) now stands at 0.6 per cent, the lowest since the global financial crisis of 2008/2009.
For the year as a whole, DBS had been expecting growth of 1.5 per cent. That will be revised lower in coming days, probably to about 1 per cent.
If there is any good news to be gleaned, it is that much of the drop in output this year has been oil-related and crude prices appear to have stabilised...Hence a similar hit to GDP growth is not expected next year."
OCBC economist Selena Ling:
"A downgrade in our full-year growth forecast is inevitable due to the third quarter disappointment and the downward revision of first half growth estimates. Given the flat-lining of services growth momentum, we revise our full-year GDP growth forecast for 2016 to 1.3 per cent year-on-year and 2017 to 1.5 per cent, down from 1.9 per cent and 2 per cent previously."
ANZ economist Ng Weiwen:
"The last time Singapore's service sector registered three straight quarters of quarter on quarter contraction was during the global financial crisis in 2008/2009, reinforcing our view that tough times are here to stay for Singapore, with growth running the risk of remaining stuck in low gear."
We are downgrading Singapore's 2016 and 2017 real GDP forecasts to 1.4 per cent and 1.9 per cent respectively (from 1.7 per cent and 2.2 per cent previously) as the economic headwinds in Q316 are unlikely to abate over the coming quarters.
While we expect the external sector to see a degree of stabilisation over the coming months as the global tech cycle picks up and the Chines eeconomy obtains a degree of traction, this is unlikely to provide a significant boost to exports. Furthermore, growth continues to be undermined by a shortage of skilled labour as a result of the government's restructuring efforts. However, we note that the city-state's economic foundation remains strong, and we do not expect it to enter a recession in the near-to-medium term.
SIM Global Education senior lecturer Dr Tan Khay Boon:
Unlike the past where a poor performance in the manufacturing sector was cushioned by a relatively strong performance in the service sector, recent trends suggest that even the service sector is losing steam and has exhibited continuous decline for three quarters. This can have serious implications as the service sector output constitutes the bulk of the Singapore GDP.
Although another quarter of negative growth may push Singapore into a technical recession, this can be avoided if the strong seasonal demand in year-end can boost the manufacturing and service sectors output sufficiently. To some extent an increase in public infrastructural and public housing construction may also help to prevent a technical recession. Nevertheless, the weak external demand, tepid growth in major trading partners and increasingly protectionist mode in the global trading environment, coupled with high operation costs and low productivity domestically are making the prospects challenging for Singapore in the near future.