26-5-2023 (Singapore) Some private-sector economists have expressed concerns that Singapore is facing a “high risk” of entering a technical recession in the second quarter, as persistent challenges in the external environment continue to pose threats to the economy, according to statements made on Thursday (May 25).
These remarks come in the wake of official data for the first quarter, which revealed a 0.4 percent contraction in the economy compared to the previous three-month period on a seasonally adjusted quarter-on-quarter basis.
This decline marks a reversal from the 0.1 percent growth witnessed in the fourth quarter of 2022, putting the economy at risk of entering a technical recession, defined as two consecutive quarter-on-quarter contractions.
Singapore last experienced a technical recession in the second quarter of 2020 when the global growth was dampened by the COVID-19 pandemic. At that time, the implementation of the “circuit breaker” measures brought nearly all economic activities to a halt for two months domestically.
However, on a year-on-year basis, the economy remains in positive territory, with a growth rate of 0.4 percent between January and March, although significantly lower than the 2.1 percent growth recorded in the previous quarter.
Authorities have maintained their forecast for gross domestic product (GDP) growth to range between 0.5 percent and 2.5 percent, with the actual expansion likely to be around the midpoint of this range.
Singapore’s small and open economy heavily relies on trade, but weakening external demand, a slowdown in the global economy, persistent inflationary pressures, and a downturn in the global semiconductor industry have all contributed to the challenges faced by the nation.
The country’s key non-oil domestic exports (NODX) have experienced a seven-month losing streak. Authorities also downgraded the NODX forecasts for 2023 following a “worse-than-expected” performance in the first quarter.
“While it is not our base case scenario, there is a high risk of the economy slipping into a technical recession either in the second quarter or the second half of the year,” warned Shivaan Tandon from Capital Economics in an interview with CNA.
“While advanced economies have shown more resilience than initially anticipated, we expect that resilience to fade in the second half of the year, which will significantly impact the demand for Singapore’s exports,” he added.
“This dynamic increases the risk of a technical recession given Singapore’s export-driven economy.”
