Disaster averted: MAS finally eases policy as Singapore escapes recession by a hair

The economy grew by a measly 0.1% in 3Q15.

The city-state bucked all qualms of analysts pointing towards an impending technical recession, albeit extremely narrowly, as its economy avoided two successive quarters of decline.

The MAS has also eased on its monetary policy, although marginally, for the second time this year to continue widening the gap between the economy and a possible recession.

According to a statement by the Monetary Authority of Singapore, though it will continue with the policy of a modest and gradual appreciation of the S$NEER policy band, the rate of appreciation will be reduced slightly.

“The Singapore economy is projected to expand at a modest pace in 2015 and 2016, with growth slightly weaker than earlier envisaged. MAS Core Inflation is expected to pick up gradually over the course of 2016 towards its historical average,” the MAS said.

Meanwhile, according to a report by OCBC, the manufacturing segment continued to contract by 3.6% QoQ following a 17.4% contraction in 2Q15. Construction also fell into negative territory at -0.8% in 2Q15.

The services segment remained the bright spot in Singapore’s hazy economy, helping it avert the potential crisis.

“The services segment was the only one that grew on a sequential basis (+0.8% in 3Q15 vs +0.2% in 2Q15),” OCBC said.

However, analysts from DBS say it didn’t quite cause the economy to avert the technical recession single-handedly, given its sluggish growth pace.

“A domestic manpower crunch and heightened risks in the global environment have weighed down on the performance of the sector,” DBS said.

DBS also warns that now is not the time to celebrate just yet, as headwinds remain just around the corner.

“Risks surrounding the US rate hike amid a sluggish recovery, a cloudy Eurozone outlook and the deceleration in China will continue to weigh down on growth outlook in the near term,” DBS said.