Singapore battles technical recession risks as GDP slated to contract in Q2

GDP is expected to contract 1.4% in Q2.

Singapore faces heightened risks of a technical recession in the first half of 2023, with NODX shrinking in Q2 heavily hinting at the gross domestic product (GDP) also contracting during the quarter, reports RHB Global Economics & Market Strategy.

The Lion City’s non-oil domestic exports (NODX) is expected to contract further in the third quarter of 2023 but make a recovery in the last three months of the year. RHB now expects full-year NODX to contract 8% compared to 2022, against a year-to-date contraction of 14.6%.

The Lion City now faces heightened risks of a technical recession in the first half of 2023, noted RHB economist Barnabas Gan.

“Singapore remains to be an export-oriented economy, thus suggesting that the softness in exports will continue to discourage manufacturing activities,” Gan said, adding that RHB forecasts industrial production to see a similar double-digit contraction rate.

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“As such, we pencil Singapore’s Q2 GDP at a contraction of 1.4% YoY (-1.9% quarter- on- quarter seasonally adjusted, thus highlighting a technical recession scenario in [the first half of the year],” Gan added. 

Full-year GDP will likely come at a 2% growth, albeit with the balance risks tilted to downside on the back of the continued weakness seen in Singapore’s externally-facing industries.