Singapore’s economy expanded more than anticipated in the second quarter, preventing a recession, but analysts cautioned the trade-dependent city would still face challenges due to sluggish international demand.
The performance of the Southeast Asian country is frequently used as a gauge of the state of the world economy due to its reliance on international trade.
According to official data, the GDP grew by 0.3% quarter-over-quarter in April through June after contracting by 0.4% over the previous three months. In a Bloomberg survey, it had been tipped to contract 0.2%.
Estimates from the commerce ministry indicate that the economy expanded by 0.7% on an annual basis after growing by 0.4% from January to March.
The unexpected result came despite the fact that manufacturing, a foundational sector of the economy that includes important semiconductor exports, fell 7.5% year-over-year, worsening from the 5.3% decrease in the first quarter.
“The economy avoided a technical recession in the second quarter but we continue to expect growth to come in well below consensus this year as elevated interest rates and weaker external demand weigh heavily on economic output,” research house Capital Economics said in an analysis, Zawya reported.
However, it stated that the advance projection is frequently subject to large revisions because it is based on data from the first two months of the quarter.
“The anticipated recovery in the global electronics industry, especially for semiconductors, appears to be delayed towards the fourth quarter…or even early 2024,” Selena Ling, chief economist at Singapore’s OCBC Bank, said.
As a result, she wrote in a note that Singapore’s domestic manufacturing slump might last at least into the third quarter.
The commerce ministry stated in May that it anticipates the economy to expand by 0.5% to 2.5% this year, but issued a warning that the global economy now faces more downside risks.
“We expect economic growth to remain subdued, and forecast the economy to grow just 0.5% this year, Capital Economics said.