“For the rest of the year, growth could be weighed down by the softening global economic conditions. In particular, the electronics cluster is expected to remain weak due to the easing of global electronics demand. Sentiment-sensitive activities within the financial services sector could also be dampened by heightened economic and financial uncertainties. As pharmaceutical output is expected to be higher in the near term compared to a year ago, the biomedical manufacturing cluster could provide some support to growth,” the MTI said in its statement.

 

Meanwhile, the Monetary Authority of Singapore (MAS) has eased its monetary policy, although CIMB Research economist Song Seng Wun says the easing is less aggressive than expected. In its first easing since 2009, the MAS reduced the slope of the SGD NEER policy band. The MAS is the second central bank in Asia to ease monetary policy after Indonesia’s central bank earlier this week.

 

Song also warns that although the country has escaped a technical recession, there are worrying underlying trends. “The economy would have contracted if not for the volatile biomedical cluster and the services sector saw its first sequential contraction in 11 quarters,” he says in a report.

 

Also worrying are the August retail sales numbers, which surprised on the downside. Retail sales growth slowed sharply to 3.3% y-o-y versus 10.7% in July and consensus expectations of 8.3% growth. Citigroup economist Kit Wei Zheng says the pullback may reflect sentiment hit on market volatility. “Earlier estimates suggest that consumption in Singapore is the most sensitive to changes in equity prices in Asia,” Kit says.