Singapore's economic growth contracted 0.9 percent in the second quarter from a year earlier and there is no sign of an immediate turnaround, the government said yesterday.
"Forward-looking indicators also point to continued weakness in the Singapore economy," the trade and industry ministry said.
The trade-driven economy was a victim of the global slowdown, especially in the crucial manufacturing sector which contracted by 9.6 percent in the second quarter in its worst performance in 16 years, the ministry.
"This was due mainly to the electronics products industry which deteriorated further to fall by 19 percent. All key segments, except computers, saw negative growth," the ministry said.
The grim year-on-year figures were reflected in rising unemployment, now at 2.6 percent and expected to reach 4.0 percent by the end of the year.
There were 5,600 jobs lost in the second quarter, 72 percent more than the 3,248 retrenchments in the first quarter.
The ministry of trade and industry said the forward-looking indicators pointed to continued weakness in the Singapore economy, but it surprised economists by maintaining its full-year growth forecast of 0.5 to 1.5 percent.
"For that growth to come to fruition it would take a significant boost in output in the fourth quarter, as the third quarter is already being seen as worse than the second," said Barclays Capital economist Desmond Supple.
"We believe there is a risk of an undershoot in the ... forecast."
An economist at SG Securities suggested the government could not announce negative growth for the full year "as that would shock the market."
"It seems a bit unlikely there will be a turnaround this year. We are already into August so we are running out of months," he said.
The 0.9 percent contraction in gross domestic product (GDP), telegraphed by Prime Minister Goh Chok Tong is his somber National Day message this week, was worse than last month's initial estimate of a 0.8 percent shrinkage.
In the first quarter, GDP rose a revised 4.7 percent year-on-year.
Singapore is already in a technical recession from two consecutive quarters of quarter-on-quarter GDP contraction. Trade ministry chief economist Tan Kong Yam said that with an expected negative third quarter Singapore was heading into a full textbook recession of consecutive quarters of year-on-year contraction.
All sectors of the economy registered slower growth in the second quarter except for financial services.
Almost 9,000 workers have been laid off so far this year and the worst is yet to come.
"Unemployment is likely to rise further in the months ahead as the full impact of the economic downturn filters into the labor market," the trade ministry said.
"Business expectations surveys also indicate a prevailing pessimistic outlook."
"In particular, firms engaged in retailing and wholesaling anticipate business conditions to be difficult. Manufacturing firms are also pessimistic about business prospects for the next six months."
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