The Republic's economy may contract in some quarters and gross domestic product growth this year is likely to be at the lower end of the official forecast range, Minister for Trade and Industry (Trade) Lim Hng Kiang warned yesterday, citing weakness from recent data such as non-oil domestic exports.
"Our base-line projection is not an outright recession, but we cannot rule out the possibility that the economy will experience some quarters of negative growth on a quarter-on-quarter basis. But overall, we expect our economy to still grow at between 1 and 2 per cent, albeit on the lower end of the projection curve," Mr Lim said in Parliament yesterday, adding that the Government will update its economic growth forecast next month.
He was replying to a question from Marine Parade GRC MP Seah Kian Peng on whether a recession is imminent, given the deterioration in recent economic data. Non-oil domestic exports had plunged 10.6 per cent in July before turning flat in August.
The Government will continue to monitor the situation closely and stands ready to respond in the event of a downturn, Mr Lim said. "Depending on the nature and severity of the downturn, the Government is prepared to consider introducing a range of contingency measures, which could include broad-based as well as sector-specific measures.
"Companies adversely affected by the slowdown can also consider tapping on assistance measures that have already been put in place," Mr Lim said, highlighting Spring's SME Working Capital Loan scheme to help address cashflow concerns and growth-financing needs.
Mr Lim's remarks echoed those of Deputy Prime Minister Tharman Shanmugaratnam, who warned last month that growth will probably be at the lower end of the Government's forecast range, due to weakness expected in the second half of the year. The Republic's preliminary GDP data for the third quarter will be released on Friday.
Some economists said a technical recession - two consecutive quarters of negative growth - could occur later this year or early next year. However, they have not made downward revisions to their growth forecasts for this year pending further economic data releases.
"The signal is mixed at the moment as the recent data have showed a slight improvement. If there is a likely quarter-on-quarter contraction, that puts the onus on the fourth quarter as the drop off the cliff. As noted, there are risk events in the coming months - United States elections and a possible Fed rate hike," said Ms Selena Ling, head of treasury research & strategy at OCBC Bank.
ANZ economist Ng Weiwen said: "If a recession is to happen, it would be technical. It could likely occur in the later part of the year or early next year. The ministers are trying to drill in that a growth below 2 per cent for Singapore is going to be the new normal. We will only consider revising our forecasts after the third-quarter advance estimates this Friday."
Both banks forecast Singapore's GDP growth at 1.9 per cent this year.
In his speech in Parliament yesterday, Minister for Trade and Industry (Industry) S Iswaran said there has been a strong take-up of Spring's loan schemes, with over S$1.2 billion worth of loans given to SMEs so far.
In April, the Government announced a grant budget of over S$2.3 billion under the Enterprise Development Fund for local companies to support efforts at the enterprise level to upgrade capabilities, automate processes and internationalise, he said.
In addition, the Government has already embarked on its S$4.5 billion Industry Transformation Programme, releasing two Industry Transformation Maps for the food services and retail sectors in recent months.
Source: Government of Singapore