With Q1 GDP up 0.1%, economists see higher risk of technical recession
Tessa Oh
SINGAPORE’S economy grew 0.1 per cent year on year in the first quarter, dragged down by weakness in manufacturing, going by advanced estimates from the Ministry of Trade and Industry (MTI) released on Friday (Apr 14).
The worse-than-expected showing has led some economists to warn of a technical recession, defined as two consecutive quarters of quarter-on-quarter contraction.
Q1’s growth was slower than the 2.1 per cent expansion recorded in the fourth quarter of last year, which was revised slightly from the advanced estimate of 2.2 per cent.
On a seasonally adjusted quarter-on-quarter basis, the economy contracted by 0.7 per cent, reversing from the 0.1 per cent expansion in the previous quarter.
Both figures came as a surprise to private-sector economists, who had expected 0.6 per cent year-on-year growth, and a 0.1 per cent sequential contraction.
“Singapore’s GDP (gross domestic product) has effectively slowed to below trend in Q1 2023, which may persist in Q2 2023, given the headwinds seen in manufacturing and trade,” said RHB senior economist Barnabas Gan in a research note.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
“Singapore risks entering into a technical recession if the boost from China’s reopening fails to materialise in the second quarter,” added Maybank economists Chua Hak Bin and Lee Ju Ye, who also expect MTI to downgrade its full-year growth forecast range to between -0.5 per cent and 1.5 per cent when the final first-quarter print is released.
MTI had in February kept to its 2023 growth forecast range at 0.5 to 2.5 per cent, noting that growth for outward-oriented sectors remains weak, given the broader slowdown in the global economy.
More worrying than the soft first-quarter growth figures is the “effective manufacturing recession”, said Vishnu Varathan, head of economics and strategy for Asia and Oceania at Mizuho Bank.
Manufacturing contracted by 6 per cent year on year in the first quarter, worsening from the 2.6 per cent contraction in the quarter prior, due to shrinking output across all but the transport engineering cluster.
“The soft GDP headline in fact understates the far more dire state of manufacturing,” he said. “The manufacturing recession not only squares with the dismal state of exports, but crucially reflects the dire state of the semiconductor industry.”
On the other hand, construction added 8.5 per cent, extending the 10 per cent growth in the previous quarter, on a pickup in both public and private-sector construction activities.
The services sector grew by 1.8 per cent, against 4 per cent in the quarter before. Only the wholesale and retail trade cluster declined among the services-producing industries in Q1, shrinking 1.1 per cent year on a year, reversing from the 2.4 per cent growth the quarter before.
The information and communications, finance and insurance and professional services cluster grew 1.9 per cent, nudging down from the 2.5 per cent growth in Q4.
Meanwhile, the accommodation and food services, real estate, administrative and support services, as well as other services cluster expanded 6.7 per cent, moderating from the 9 per cent in the previous quarter.
Maybank’s Chua and Lee noted that though the services sector expanded in Q4, it was still “much weaker than expected”, with gains in the retail trade and air transport segments offset by declines in wholesale trade.
Copyright SPH Media. All rights reserved.
