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ALL EYES ARE now on economic data and increasingly, economists are sounding downbeat in the wake of the Eurozone crisis. Locally, talk of a technical recession is getting louder. Mark Tan, Singapore economist at Goldman Sachs, says he expects negative sequential growth in 3Q2011, making it the second consecutive quarter of negative growth and a “technical recession” by definition. However, this time round, inflation will prove “sticky”.
Inevitably, growth will be a casualty of the slowdown in the US, Europe and Japan. Goldman is forecasting a 2.5% q-o-q annualised fall in GDP in 3Q2011 after the 6.5% q-o-q annualised fall registered in 2Q2011. The slowdown comes mainly from the external sector given the rising risks to global demand. Some slowing in momentum is also to be expected after the sharp 27% q-o-q annualised spike in 1Q2011, Tan says.
Singapore’s non-oil exports rose 5.1% y-o-y in August after falling 2.8% in July, beating consensus estimates of a 7.1% decline. While this figure is something of a surprise, it was attributed to a one-off surge caused by delivery of transport equipment, believed to be one or more oil rigs, and optical apparatus. But key electronics sales continued to slump by 19.4% and even pharmaceutical sales were down by 7.1%.
Goldman is forecasting full-year GDP growth of 4.8% “with risks skewed to further downside, depending on unfolding global developments”. The forecast is already below the government’s recently revised forecast range of 5–6% and Tan reckons that the government’s forecast will be revised lower in the months ahead.
If Singapore slips into a “technical recession” again, this will be the fourth recession the country has experienced over the last 10 years, compared to just twice for Malaysia, once for Thailand and none for Indonesia.
But as Tan sees it, recessions in Singapore aren’t such a bad thing since it is mitigated by an active stance on job creation. For instance, in 2009, the budget was expansionary with a job credit scheme which gave employers a significant cash grant for every employee on their payroll. The result was that during 2008–2009, Singapore experienced continuous job creation compared to significant job losses in previous recessions.
