Recession dodged, but risks abound

Contrary to most economists’ forecasts, the Singapore economy narrowly dodged a technical recession in the second quarter by growing 0.3 per cent over the previous three months, according to the advance estimates for gross domestic product (GDP) growth released by the Ministry of Trade and Industry (MTI) last week. However, several risks relating to external trade, a continuing manufacturing slump and China’s tepid economic recovery could lead to growth forecasts for 2023 having to be downgraded from the present range of 0.5 per cent to 2.5 per cent.

The flash estimates for the second quarter, which are based on two months’ data and are subject to revision, also surprised on the upside by indicating year-on-year GDP growth of 0.7 per cent, which was above the Bloomberg consensus forecast among economists of 0.5 per cent. Broad-based positive growth in the services sector as well as construction more than offset the 7.5 per cent decline in manufacturing, which was worse than the 5.3 per cent contraction in the first quarter. Domestically focused services such as accommodation and food, real estate and administrative and support services did especially well, growing 6.6 per cent year on year.