Singapore’s Economy Could Shrink Further, Poll Predicts

People walk past office buildings at the central business district in Singapore in this April 14, 2015. (Photo: REUTERS/Edgar Su/File Photo)

The Singaporean economy is expected to have contracted further in the second quarter of this year, a Reuters poll indicated. While the expected shrinking of nearly three percent is already an improvement from previous estimates, recession risks are still rampant.

The poll suggested that Singapore's final GDP may have dropped by 2.9 percent during Q2 as economists pointed out that the city-state is now more at risk of recession than ever before.

In earlier estimates, the government predicted that GDP may have contracted by 3.4 percent. The forecast is already lower than the expansion in the first quarter, which reached 3.8 percent.

Some of the known reasons for slower GDP growth in Singapore are weaker domestic exports on non-oil products. Another potential culprit is weaker retail sales - a key driver in the Singaporean economy.

Singapore is not exempt from the possibility of a global recession, experts said. The central bank is expected to cut rates when the second semi-annual policy announcements are made sometimes October.

As for the third quarter, Credit Suisse analysts said they are expecting "a technical recession" driven by a sharp decline in Singapore's manufacturing segments as well as its key electronics production sectors.

Amid the pessimism for Singapore's economic expansion, Prime Minister Lee Hsien Long said on Thursday, during the National Day commemoration, that the government will continue to support citizens amid "troubled period."

As part of the government's efforts in helping ease the citizens' troubles, Lee announced that the government is planning to offer more affordable options for tertiary and preschool education. The cheaper education plans will be focused on lower to middle-income families, he said.

Lee went on to encourage his people, noting that the city-state has overcome similar slowdowns in economic expansion in the past. "Should it become necessary to stimulate the economy, we will do so," he promised.

On the other hand, Lee admitted that the road ahead will be tough to stride. He said the Singaporean community should brace itself for "a very different future," seemingly nodding to pessimistic views about the economy.

Amid the economic struggles that Singapore is faced with, several investors expressed optimism over the world's resilience in weathering difficult storms. A UBS Investor Sentiment survey released on Thursday indicated that Asian investors are those who are still hopeful of the global economy's recovery.

A large number of Singaporean investors, according to the survey, are interested in sustainable investments as they see these as a way of curbing the impact of global trade tensions and other external headwinds.

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