Singapore: Economic growth slump confirmed in Q2; MTI slashes growth forecast for 2019
Comprehensive national accounts data released on 13 August confirmed that economic growth slowed sharply in the second quarter. Growth decelerated to 0.1% year-on-year in Q2, matching the preliminary estimate and well below Q1’s 1.1% expansion. In quarter-on-quarter SAAR terms, the economy contracted 3.3% (previously reported: -3.4% SAAR), contrasting Q1’s 3.8% expansion.
The external sector was the main driver behind the second quarter’s slump. Net exports of goods and services contracted 6.0%, sharper than Q1’s 0.8% decline, mainly the result of a softer fall in imports of goods and services in the second quarter. This was likely the result of weaker domestic demand, coupled with tepid purchasing activity among manufacturing firms. Moreover, exports of goods and services continued to decline amid ebbing global trade.
On the domestic front, private consumption growth ebbed to 3.4% in Q2 from the previous quarter’s 5.4%, while government consumption growth ticked up slightly to 3.1% in Q2 from 3.0% in Q1. Furthermore, gross fixed capital formation decreased at a faster pace in the second quarter, contracting 0.3% (Q1: -0.2% year-on-year).
Looking ahead, the economy is projected to expand at the slowest pace in a decade this year due to a weaker global growth outlook, a slowdown in global demand for tech and heightened U.S.-China trade tensions. That said, a tight labor market and under-control inflation should support household spending. Moreover, in recent weeks central banks around Asia have cut their policy rates, which may put pressure on the MAS to add some monetary stimulus in its October meeting to support the economy.