It's official: Singapore's lucrative manufacturing sector slips into recession

It contracted for three straight quarters.

Manufacturing, once the stalwart of Singapore's miracle economy, has officially slipped into cyclical recession last quarter.

According to DBS, the sector's output dropped by 18% in Q2, marking the third consecutive quarter of output contraction.

Although sluggish global demand played a major role in the drop, DBS said that structural issues are also at play. These include higher labour costs, cutthroat regional competition and domestic restructuring.

"Singapore manufacturers have been struggling over the past 3 years. The GDP share of manufacturing fell from 26% in 2004-06 to just 17% in 2013-
2014. At the current pace of decline, the sector would become irrelevant before
long," DBS said.

"Beyond external headwinds and global uncertainties, Singapore manufacturers have been struggling with higher business costs, a domestic labour crunch and a strong SGD in recent years. Unwinding some of the restructuring measures could bring only short-term reliefs. In the longer term, unless Singapore can find ‘greener pastures’ in manufacturing, the structural decline seems likely to continue," DBS added.