Growth in export-reliant Singapore suffered a surprise sharp contraction in the second quarter, official data showed yesterday, sending a stark warning that US-China trade tensions are hurting the global economy.
The city-state’s GDP shrank an annualized 3.4 percent, which was sharply down from 3.8 percent growth in the first three months of the year and well off forecasts of a slight expansion.
On a year-on-year basis, it expanded just 0.1 percent, the Singapore Ministry of Trade and Industry said, marking the slowest rate since the global financial crisis in 2009 and well short of estimates.
With its heavy dependence on foreign trade, Singapore is often seen as an indicator of the global economy’s health.
The dismal figures were the latest sign trade tensions between Washington and Beijing are having a major effect on export-reliant economies around the world.
“The ongoing US-China trade war ... is negatively impacting Singapore’s key manufacturing and export sectors,” Vanguard Markets Pte Ltd analyst Stephen Innes said.
COAL MINE CANARY
“Singapore is the canary in the coal mine, being very open and sensitive to trade,” said Chua Hak Bin (蔡學敏), an economist at Maybank Kim Eng Research Pte in Singapore.
The data point to the risk of a deepening slowdown for the rest of Asia. The key manufacturing sector was hard hit, contracting 3.8 percent year-on-year, compared with a 0.4 percent decline in the previous quarter.
EXPORT SLOWDOWN
The data added to concerns about a slowdown in the export sector — non-oil domestic exports plunged in May by the most since February 2013, driven by heavy falls in the electronics sector.
Like South Korea’s economy — which already contracted in the first quarter — Singapore is often held up as a bellwether for global demand given its heavy reliance on foreign trade.
Across Asia and Europe, factory activity shrank last month, while the US showed only a meager economic expansion.
Asia is the world’s growth engine and contributes more than 60 percent of global GDP, according to the IMF.
Rob Subbaraman, head of global macro research and cohead of global markets research at Nomura Holdings Inc, concurred, saying that the “large downside GDP miss does not bode well for the rest of Asia.”
TECHNICAL RECESSION
Some analysts are now betting that Singapore could slip into a technical recession — two straight quarters of economic contraction — next year.
There is also a greater chance that the Monetary Authority of Singapore, the central bank, will ease monetary policy in a bid to support the economy, economists say.
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