Slowing services sector will fail to salvage Singapore’s flagging economy: DBS

The odds of a recession are higher than ever.

Singapore’s services sector has been given the heavy burden of driving Singapore’s economic growth as manufacturing slows, but DBS warns that the once-reliable growth driver may fail to live up to the task this year.

This is because recent statistics point to a continuing slowdown in the sector, with growth moderating to 3.5% year-on-year in the second quarter from 4.2% previously.

The sector also continues to be buffeted by the domestic manpower crunch. While domestic services will continue to struggle with the manpower constraint, external oriented services linked to the tradable sector have been undermined by the heightened risks in the global economy.

“The dismal outcome in manufacturing has raised the odds of a technical recession. However, whether the economy eventually dips into a technical recession depends not only on the manufacturing sector, but also the services sector. Indeed, the services sector has contracted by 1.1% QoQ SAAR in 2Q15. Another quarter of contraction will spell a technical recession for the whole economy,” said DBS.