Singapore seen narrowly dodging recession in third quarter, central bank to ease

SINGAPORE (Reuters) - Singapore’s economy likely escaped a technical recession in the third quarter even as growth stayed subdued, weighed down by the prolonged trade dispute between the United States and China, a Reuters poll showed.

FILE PHOTO: People pass the skyline of Singapore October 11, 2017. REUTERS/Edgar Su/File Photo

Gross domestic product (GDP) is expected to have increased 1.5% on a quarter-on-quarter, seasonally adjusted and annualized basis in July-September, according to the median forecast of 11 economists in the poll.

That would mark a recovery from a 3.3% drop in the second quarter, the biggest contraction in nearly seven years, but analysts say the outlook remains weak as global demand shows further signs of faltering.

“Third-quarter GDP is expected to stay weak and narrowly dodge a technical recession,” said Lee Ju Ye, an economist with Maybank Kim Eng.

“Manufacturing will likely remain in recession, while services will be supported by the financial sector, tourism-related services and business services,” she said.

The standard technical definition of a recession is two consecutive quarters of economic contraction.

Third-quarter GDP is expected to have expanded 0.3% from the same period a year earlier, the poll found. The economy grew 0.1% in April-June - the slowest annual growth since 2009’s second quarter, when it fell 1.2%.

Like many other export-reliant Asian economies, Singapore has been hit hard by cooling global demand and the escalating Sino-U.S. trade war, which has disrupted world supply chains in a blow to business investment and corporate profits.

The city-state’s manufacturing sector has suffered particularly, buffeted by the trade tensions and a cyclical downturn in the electronics sector.

All 11 economists polled by Reuters last week are expecting the Monetary Authority of Singapore to ease monetary policy at its semiannual meeting on Oct. 14, the same day third-quarter GDP is announced.

The Singapore government is also expected to roll out a generous budget ahead of an election next year as the ruling party seeks to appease voters who are feeling the pinch from the economic downturn.

Reporting by Fathin Ungku and Aradhana Aravindan in Singapore; Editing by Kim Coghill