SINGAPORE - Singapore's exports figures for August will likely remain poor, economists cautioned, warning that the probability of a technical recession in the third quarter is increasing.

The headline non-oil domestic exports (NODX) data for last month, due out on Thursday (Sep 17), is expected to register a year-on-year decline of 2.7 per cent, DBS Group Research said in a note released on Wednesday (Sept 16).

"External headwinds arising from the deceleration in China's growth would be the key reason behind the dire outcome," said DBS Research. "Though the depreciation in the Singapore dollar may provide some valuation lift to the number, the drag from demand weakness will likely dominate."

Its forecast for August exports is weaker compared with the official reading for July, when NODX fell 0.8 per cent year-on-year.

At OCBC, economist Selena Ling sees an even worse export performance, due partly to the high numeric base of August last year.

Ms Ling told the Straits Times: "Our forecast for August's NODX is a 4.1 per cent year-on-year decline. Aside from the high base, the depreciation of the Chinese yuan last month has added to the resurgent concerns around China's economy, which means companies are more cautious about trading."

China's slowdown is part of the grim outlook that regional economies are facing now. As uncertainties continue to loom, economists surveyed by the Monetary Authority of Singapore last month slashed their Singapore growth forecast for the third quarter from 2.9 per cent to 2.1 per cent year-on-year.

Barring a surprise improvement in exports and manufacturing, the possibility of Singapore slipping into a technical recession in the third quarter is rising. Technical recession means two consecutive quarters of quarter-on-quarter fall in gross domestic product.

DBS Research said: "No doubt (August's NODX) will raise the risk of a technical recession. The economy contracted by 4 per cent quarter-on-quarter in the second quarter, led by a 18.3 per cent drop in manufacturing output. Indeed, the manufacturing sector is already in recession."

Ms Ling agreed. "The risk of a technical recession in the third quarter is increasingly real, with a 40 to 50 per cent chance of happening looking at the current conditions," she said.