ASEAN KEY DESTINATIONS
Singapore GDP slows in Q2
SINGAPORE’S economy grew slower-than-expected in the second quarter on softer manufacturing and construction, keeping pressure on the central bank to further ease policy in the face of sluggish global demand and concerns over Brexit.
The trade-reliant economy expanded 0.8 per cent in the April-June period from the previous three months on an annualised and seasonally adjusted basis, the Ministry of Trade and Industry said yesterday.
That compared with a 0.9 per cent rise forecast in a Reuters poll and 0.2 per cent growth in the first quarter, suggesting only a modest bounce that could unravel on the Brexit fallout.
Manufacturers remained under stress, with the sector growing 0.3 per cent in the second quarter from the previous three months, well off an 18.4 per cent expansion in the first quarter.
“The sequential slowdown of the economy, especially in the manufacturing sector, means that the MAS must choose between a weaker currency or lower interest rates,” said Trinh Nguyen, senior emerging Asia economist for Natixis in Hong Kong, referring to the Monetary Authority of Singapore.
Nguyen expects further monetary policy easing in October through a re-centring of the S$NEER policy band lower.
The MAS manages policy by letting the Singapore dollar rise or fall against the currencies of its main trading partners based on its nominal effective exchange rate (NEER).
In April, in an effort to weather a slowdown in Singapore’s biggest export market China and falling consumer prices, the central bank unexpectedly eased policy by setting the rate of appreciation of the policy band at zero per cent.
The Singapore dollar has strengthened on safe-haven demand in emerging Asia, exacerbating both deflationary pressures and faltering exports—a development that is doubly worrying given a fallout on global growth from Britain’s shock vote to leave the European Union.
The services sector, which has underpinned Singapore’s growth in recent years as manufactures have struggled, expanded 0.5 per cent on-quarter, bouncing from a 4.8 per cent contraction in the first quarter. But growth in the sector “remains sluggish,” DBS analysts said, noting that the crucial financial services were still wrestling with risk-aversion.
The ample signs of a faltering economy—vacant floors in some central shopping malls and labour shortages—have already prompted some economists to tip an easing in October.
On Wednesday, the Brexit worries prompted Malaysia’s central bank to unexpectedly cut interest rates for the first time in seven years.
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