Economists gloomy on Singapore’s outlook despite dodging technical recession

IS A TECHNICAL RECESSION OUT OF THE PICTURE?

Singapore’s economy grew 0.7 per cent year-on-year for the April to June period, according to advanced GDP estimates released by MTI on Friday.

On-quarter, the economy recovered to positive territory at 0.3 per cent, from a 0.4 per cent contraction in the January to March period.

The rebounded helped Singapore escape a technical recession, commonly defined as two consecutive quarters of negative growth in real GDP.

When asked if Singapore is still at risk of a technical recession, Mr Tan replied that the economy looks to be in the clear, at least for the rest of the year.   

“We are already seeing some signs of stabilisation in exports around the region,” he said.

“My guess would be that we are already seeing the bottom of the weakness that we had been getting recently. Hopefully for the rest of this year, there is a little bit of a gradual pickup.

“But how strong that would be, we will be quite cautious. We think the recovery, if there is one, is going to be relatively gradual. I would describe it more like a stabilisation rather than a significant jump from where we have been.”

EASING INFLATION

Core inflation is expected to moderate into the end of the year, said Mr Tan.

However, he cautioned that it is likely to remain elevated, between the 2.5 and 3 per cent range.

This is due to a sluggish economy and a tight labour market where many businesses are still struggling to find enough workers, he said.

A strong Singapore dollar will also help temp down some of the inflationary pressures, Mr Holmes said.

“Singapore imports most of the things it consumes. So a stronger currency pushes down the price of those imports,” he explained.

However, the weak economic growth outlook is likely to prompt the Monetary Authority of Singapore (MAS) to loosen monetary policy sooner than expected, he added. 

“The weak growth backdrop will give the MAS food for thought. We have previously said we expect the authority to loosen in early 2024, but there is a risk such a move comes sooner,” he said.