Mitsui Credit Global: City state, Singapore’s gross domestic product contracted by an annualized 4.6% in the second quarter as slowing global demand impacted upon the country’s trade and investment links. This compared with a revised 4.2% expansion in the first three months of the year.
“A slump in commodities, China’s economic cooling and uneven economic recoveries in both Europe and the United States have impacted upon the exports that many smaller Asian economies rely upon for growth,” said a Mitsui Credit Global Asian markets analyst.
Singapore’s contraction was the worst since the third quarter of 2012 and calls are increasing for the country’s central bank to ease monetary policy as a way of spurring bank lending and the country’s real estate market.
Manufacturing output weakened sharply by 4% while the services sector grew 3% year-on-year in the second quarter. The news comes as sentiment in Singapore mounts in preparation for a national celebration of 50 years of its independence from Great Britain.
Mitsui Credit Global says that, with key trading partner, China’s recent stock market rout threatening to spill over into the real economy, the general consensus outlook for Singapore is downbeat.
Nevertheless, the Japan-based investment house says that Singapore’s position as a hub for international finance and banking means that its economy will likely be more receptive to monetary easing than those with greater reliance upon exports.
“We don’t expect the central bank to bring forward its interventions but we expect any actions it takes to be felt quite swiftly particularly if, as we suspect, the slump in China may be losing momentum,” said the Mitsui Credit Global analyst.
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