Singapore on Brink of a Technical Recession

Third-quarter gross domestic product (GDP) on tap this week may unveil a foggy economic outlook for Singapore, mirroring the hazy skies that have shrouded the Southeast Asian island-state for the past month due to seasonal pollution from the burning of Indonesia’s forests and land.

Advance estimates for the July-September quarter, scheduled for release at 8am local time on Wednesday, are expected to show the economy growing 1.3 percent on-year, according to a Reuters poll.

However, on a quarter-on-quarter basis, the economy likely shrank 0.1 percent from the previous three months on an annualized and seasonally adjusted basis, the Reuters poll said, following a 4.6 percent contraction in the April-June quarter.

This would put Singapore in a technical recession, which is commonly defined as two successive quarters in which the economy contracts from the previous quarter.

Singapore’s economy last went through a recession in 2008 when a slowdown in U.S. and European consumer demand hit the country’s crucial manufacturing sector.

This time round, a confluence of factors such as erratic global demand led by a slower-growing China – a major market for Singapore – and domestic issues such as a tight labor market are among the culprits dampening the outlook of the affluent city-state.

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Industrial output declined more than expected in July and August, while the all-items consumer price index fell for the 10th consecutive month in August to a post-global financial crisis low.

Meanwhile, the all-important exports sector is likely to stay in the doldrums. September non-oil domestic exports (NODX) due on Friday, likely fell 3.6 percent on-year, said economists polled by Reuters, after an 8.4 percent slide in August and 0.7 percent slip in July.


Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza