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PR Newswire
27-08-2011, 07:39 AM
The Straits Times
Aug 27, 2011
Singapore 'at risk of technical recession this year'
Trade data suggests economy may shrink this quarter
By Aaron Low
THERE is almost a one-in-two chance that Singapore will slide into recession this year, given the country's lacklustre export performance, according to a Bank of America Merrill Lynch report.
The bank's director of global research, Dr Chua Hak Bin, said a study of trade data suggests there is a 41 per cent possibility of the country entering a technical recession later this year.
A technical recession is defined as two consecutive quarters of economic contraction.
In the last quarter, the economy shrank 6.5 per cent compared with the previous three months, and analysts expect to see another contraction this quarter.
Dr Chua said his prediction was based on the performance of non-oil domestic exports (NODX), which fell 2.8 per cent last month compared with a year ago.
'NODX has been a reliable indicator, generating only two 'false positives' or false signals since 1984,' he said.
He is worried that a technical recession might turn into a full-blown recession - a contraction across all sectors of the economy and even a rise in unemployment.
'Things are fluid at this stage but there are considerable risks that Singapore could enter a full recession,' added Dr Chua.
His gloomy forecast was backed by a weaker-than-expected showing for manufacturing, according to an Economic Development Board report.
Manufacturing expanded 7.4 per cent last month compared with July last year - a shade less than the 7.8 per cent forecast by private-sector economists.
The main boost to manufacturing came from pharmaceuticals, which shot up 47.7 per cent as factories switched to different types of drug production.
Medical technology production also surged, rising 24.2 per cent last month compared with July last year.
However, in a sign that global demand had dropped significantly, electronics manufacturing contracted for the second consecutive month, falling 18.2 per cent.
Output from companies that supply makers of smartphones and other consumer electronic goods grew 22.3 per cent, but the rest of electronic manufacturing - including data storage, semiconductors and computer peripherals - contracted.
Chemicals manufacturing grew 5.4 per cent, while petroleum manufacturing expanded 8.3 per cent.
DBS economist Irvin Seah said that although manufacturing grew modestly last month, the overall picture was not entirely optimistic.
He noted that pharmaceuticals had single-handedly sustained growth in manufacturing over the past few months.
'The good news is that manufacturing activity did not decline sharply as growth was basically flat between June and July,' he added.
Barclays Capital economist Leong Wai Ho was more optimistic, blaming the fall in electronics manufacturing on the closure of Seagate's manufacturing facilities here last December.
'We will be affected by this structural drag until this December,' he said.
He did not expect a technical recession 'because the cyclical slowdown in electronics will probably ease in the next few months, while pharmaceuticals is going from strength to strength'.
Meanwhile, in the services sector, a separate report by the Department of Statistics showed that it had continued to grow sturdily.
Business receipts for the sector rose 6.6 per cent compared with the same period last year.
Health and social services performed the best, growing 11.1 per cent, while financial services rose 10.4 per cent.
aaronl@sph.com.sg
Aug 27, 2011
Singapore 'at risk of technical recession this year'
Trade data suggests economy may shrink this quarter
By Aaron Low
THERE is almost a one-in-two chance that Singapore will slide into recession this year, given the country's lacklustre export performance, according to a Bank of America Merrill Lynch report.
The bank's director of global research, Dr Chua Hak Bin, said a study of trade data suggests there is a 41 per cent possibility of the country entering a technical recession later this year.
A technical recession is defined as two consecutive quarters of economic contraction.
In the last quarter, the economy shrank 6.5 per cent compared with the previous three months, and analysts expect to see another contraction this quarter.
Dr Chua said his prediction was based on the performance of non-oil domestic exports (NODX), which fell 2.8 per cent last month compared with a year ago.
'NODX has been a reliable indicator, generating only two 'false positives' or false signals since 1984,' he said.
He is worried that a technical recession might turn into a full-blown recession - a contraction across all sectors of the economy and even a rise in unemployment.
'Things are fluid at this stage but there are considerable risks that Singapore could enter a full recession,' added Dr Chua.
His gloomy forecast was backed by a weaker-than-expected showing for manufacturing, according to an Economic Development Board report.
Manufacturing expanded 7.4 per cent last month compared with July last year - a shade less than the 7.8 per cent forecast by private-sector economists.
The main boost to manufacturing came from pharmaceuticals, which shot up 47.7 per cent as factories switched to different types of drug production.
Medical technology production also surged, rising 24.2 per cent last month compared with July last year.
However, in a sign that global demand had dropped significantly, electronics manufacturing contracted for the second consecutive month, falling 18.2 per cent.
Output from companies that supply makers of smartphones and other consumer electronic goods grew 22.3 per cent, but the rest of electronic manufacturing - including data storage, semiconductors and computer peripherals - contracted.
Chemicals manufacturing grew 5.4 per cent, while petroleum manufacturing expanded 8.3 per cent.
DBS economist Irvin Seah said that although manufacturing grew modestly last month, the overall picture was not entirely optimistic.
He noted that pharmaceuticals had single-handedly sustained growth in manufacturing over the past few months.
'The good news is that manufacturing activity did not decline sharply as growth was basically flat between June and July,' he added.
Barclays Capital economist Leong Wai Ho was more optimistic, blaming the fall in electronics manufacturing on the closure of Seagate's manufacturing facilities here last December.
'We will be affected by this structural drag until this December,' he said.
He did not expect a technical recession 'because the cyclical slowdown in electronics will probably ease in the next few months, while pharmaceuticals is going from strength to strength'.
Meanwhile, in the services sector, a separate report by the Department of Statistics showed that it had continued to grow sturdily.
Business receipts for the sector rose 6.6 per cent compared with the same period last year.
Health and social services performed the best, growing 11.1 per cent, while financial services rose 10.4 per cent.
aaronl@sph.com.sg
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