Singapore is probably not yet in recession but the authorities are poised to step in with support measures, according to Indranee Rajah, the minister for the Prime Minister’s Office.
“We’re not new to difficult economic situations, we’re not new to recessions,” Rajah, who has a finance and education portfolio, said: “We don’t think we’ve gone into a recession as yet, but we’re keeping a very close eye on it.”
Singapore has felt the pressures of the US-China trade war, with the government lowering this year’s growth forecasts to near zero after the economy contracted to an annualised 3.3 per cent in the second quarter from the first quarter. Third-quarter figures are yet to be published.
Singapore’s deputy prime minister, Heng Swee Keat, has warned of greater economic uncertainty to come because of the US-China trade war. Donald Trump’s spat would significantly disrupt the global supply chain if it continued, he added. “There is trade friction. There is no sign of it abating. This is a very important time for us to come together and look at what is it we can do together, given this broader global context of southeast Asia and rest of Asia, and all those like-minded countries around the world can come together, and support global integration and for us to tackle many global challenges around the world,” Heng said.
The Purchasing Managers’ Index (PMI) came in at 49.5 for September, indicating a contraction in manufacturing activity.
A score below 50 indicates that a sector is shrinking and the PMI has now shrunk for five consecutive months.
“The prolonged uncertainties in the major global markets have weakened demand and increased cost pressures on manufacturers, and are further aggravated by disruptive global supply chains,” said Sophia Poh of the Singapore Institute of Purchasing and Materials Management, which produces the figures.
Declining orders and factory output and a faster contraction in employment and exports had caused the fall, the institute said.
Selena Ling, head of research at the OCBC Bank, said while manufacturing weakness had been obvious for a while, its related effects on consumer sentiment and other service sectors were starting to become apparent.
“This may translate to some softness in the labour market ahead, and is something that policymakers are probably watchful for,” she said.
But the government has pledged to act to bolster the economy.
“If there is a need to, and the government needs to step in with assistance, we will do so,” Rajah said. “If we need some safety nets and buffers, then our agencies will have to step in.”
Rajah also said, ahead of the general election, that Singapore needed stability, growth and a focus on jobs.
Singapore was always going to be particularly at risk in Donald Trump’s trade war. Picture credit: GoodFreePictures