Singapore: After Germany entered recession, Singapore fears slipping into a ‘technical recession’ in the second quarter as the country’s exports outlook weakened following a slowdown in global demand, Channel NewsAsia (CNA) reported citing economists.
Singapore’s economy is heavily dependent on exports, which has been weakening after several agencies earlier forecasted a slowdown in global economies in 2023.
‘There remains a high risk that the economy slips into a technical recession, either in (the second quarter) or in the second half of the year,’ CNA, Singapore’s state broadcaster reported Shivaan Tandon from Capital Economics, as saying.
A technical recession is often defined as two consecutive quarters of negative growth in the real GDP.
‘While advanced economies have held up better than initially expected, we expect that resilience to fade in the second half of the year which will weigh heavily on demand for Singapore’s exports,’ he added.
He further stated that these dynamic raises the risk of a technical recession given the export-driven nature of Singapore’s economy.
These comments came after the official data for the first quarter showed the economy declined 0.4 per cent, reported CNA.
This marks a reversal from the 0.1 per cent growth in the fourth quarter of 2022, leaving the economy at risk of a technical recession which is defined as two consecutive quarter-on-quarter contractions.
Singapore’s small and open economy relies heavily on trade, but external demand has been weakening amid a slowdown in the global economy, still-strong inflationary pressures and a downturn in the global semiconductor industry.
The country’s key non-oil domestic exports (NODX) have since chalked up a seven-month losing streak. Authorities on Thursday also downgraded the 2023 forecasts for NODX following a ‘worse-than-expected’ performance in the first quarter.
Meanwhile, Maybank economists Chua Hak Bin and Lee Ju Ye, with the weaker performance in the external-oriented sector, see Singapore’s economy stagnating, instead of staging a rebound, in the coming quarters, according to CNA.
They added that Singapore may slip into a technical recession ‘if the boost from China’s reopening fails to materialise in the second quarter’.
Earlier, the German economy was in recession in early 2023 after household spending in Europe’s economic engine finally succumbed to the pressure of high inflation, according to Reuters.
Gross domestic product fell by 0.3 per cent in the first quarter of the year when adjusted for price and calendar effects, a second estimate from the statistics office showed on Thursday.
This follows a decline of 0.5 per cent in the fourth quarter of 2022. A recession is commonly defined as two successive quarters of contraction, as per the report in Reuters.
Germany’s Finance Minister Christian Lindner, on Thursday, said that the GDP data showed ‘surprisingly negative signals.’
He added that comparing Germany with other highly developed economies, the economy was losing the potential for growth.
‘I don’t want Germany to play in a league in which we have to relegate ourselves to the last positions,’ Lindner said, referring to the forecasts of the International Monetary Fund, which predicted a recession in 2023 only in Germany and Britain among European countries, according to Reuters.