Singapore economy to avoid technical recession in Q3: Report, Latest Business News - The New Paper

Singapore economy to avoid technical recession in Q3: Report

This article is more than 12 months old

Singapore's economy is expected to avert a technical recession in the third quarter this year, thanks to a mild improvement in the manufacturing sector, though support is still warranted, according to the latest report by DBS Group Research.

According to DBS analysts, the economy will likely register a growth of 0.4 per cent year on year, and a growth of 2.1 per cent year on year in the third quarter, based on a seasonally adjusted annual rate.

"Yet, output gap has turned even more negative in the second quarter of 2019. This explains why inflation has persistently surprised on the downside thus far," the analysts said.

"Overall inflation for the year is projected to average 0.5 per cent, before rising to 1.1 per cent in 2020."

They added that inflation continues to slip on the back of lower electricity tariffs.

But the headline number is likely to bottom out, before rising steadily in the coming months.

Looking ahead, spikes in oil prices could be one of the key drivers of inflation.

A 10 per cent rise in oil prices, for instance, will lift the consumer price index inflation by about 0.3 percentage point, the analysts noted.

The report, which was released yesterday, also highlighted that a robust fiscal budget is expected early next year to render support for the economy, while the Monetary Authority of Singapore will most likely ease the monetary policy stance moderately next month.

"An outsized accumulated surplus of about $15.6 billion implies ample room for aggressive fiscal support for the economy. We expect a highly expansionary fiscal policy early next year," said the DBS analysts. - THE STRAITS TIMES