Two-thirds of Singapore's economy is already in technical recession: analyst

No thanks to the slump in services sector.

With the services sector's two consecutive quarters of declines, a contraction in GDP is on the cards now for Singapore as headline number is reported to decline by 0.5%, down from the modest expansion of 0.3% in the previous quarter.

According to DBS Group Research, the advance GDP growth figures for 3Q16 will likely disappoint as YoY growth is likely to dip 1.5% from 2.1% in 2Q16.

"The weak performance will be broad-based with the manufacturing sector expected to fall back into contraction and the services sector still struggling. Indeed, the main drag thus far has been the services sector," the research firm said.

DBS noted that services sector accounts for slightly more than two-thirds of GDP and employment.

"So literally, two-thirds of the economy is already in a technical recession given the services’ slump," it noted.

DBS cited that financial services sector, which is the main engine of growth, is still struggling with protracted decline in bank loans.

It furthered that trade related services are also slated to ease given the slowdown in the manufacturing cluster.

"In addition, tourism related services may be modestly affected by the Zika virus while the retail sector is hit by the softening in employment prospects. Basically, outlook on the services sector has remained bleak," the research firm added.