Singapore heading for recession next quarter

Singapore’s economy will probably experience a “shallow technical recession” in the third quarter as the global trade outlook worsens, according to Maybank Kim Eng Research.

(FMT) – The escalating US-China trade conflict is weighing on Singapore’s export-reliant economy, which Maybank expects will grow 1.3% this year, down from a previous projection of 1.6% and lower than the government’s forecast range of 1.5% to 2.5%.

“Disruptions to the supply chain will likely intensify as the trade war broadens to tech and the US imposes export controls on more Chinese tech firms,” Maybank economists Chua Hak Bin and Lee Ju Ye said in a note.

The slump in exports has hit manufacturing, which contracted more than expected in May, data showed.

The outlook for electronics, which make up 27% of factory output, is particularly weak since US export controls may hit chip makers like Broadcom Inc and Intel Corp, which operate in Singapore, Maybank said.

Singapore’s grim export numbers add to economy’s warning signs.

A recession is defined as two consecutive quarters of negative quarter-on-quarter growth, and if that happens it will increase the chance of the central bank easing monetary policy in October, the economists said.

The Monetary Authority of Singapore, which uses the exchange rate as its main tool, left its policy settings unchanged in April.