Singapore avoided recession with a small but unexpected expansion in the third quarter, though it was so small the country's central bank went ahead with an expected weakening of the currency, which should help the country's exporters. The economy grew 0.1 percent from the second quarter, compared with a 2.5 percent decline in the second quarter from the previous quarter, the Monetary Authority of Singapore said in a statement. Economists had expected a 0.1 percent decline, which would have resulted in two straight declines, the usual definition of a recession. (Figures are adjusted for seasonal factors and annualized.)
Wholesale trade and transportation lifted the number, fueled by the oil industry, as did housing construction by the government, the central bank said. It said the drags were the country's export-oriented manufacturing sector and the banking sector as regional lending weakened. The bank dwelled on weak global growth, including China's slowdown.
"The overall outlook for the global economy has softened," the central bank said in its statement. "While the U.S. economy is likely to expand at a stronger pace on robust private consumption, its import demand has been weak. China’s growth momentum is easing on a sharp deceleration in investment growth. Taken together, these factors will weigh on the region’s commodity producers and trade-dependent economies. "
"The subdued global growth will exert a drag on the external-oriented sectors in Singapore in the quarters ahead," it said, projecting full-year growth this year and next will be in the 2 percent to 2.5 percent range.
Within manufacturing, the transport engineering cluster will continue to be hampered by a cutback in oil exploration activities. The weakness in IT production and its supporting industries will also persist due to sluggish final demand and ongoing reconfigurations in the electronics cluster.
The central bank, which uses the exchange rate rather than interest rates to boost or slow the economy, said it will slow the rate of appreciation of the Singapore dollar. It's the second time this year that it has done so.
While Singapore is small, about 720 square kilometers (about 278 square miles) compared to about 790 square kilometers (305 square miles) for New York City, it is a Top 5 country in per capita income, or the size of the economy divided by the population. That gives the government the leeway to boost the economy.
“We still have quite a bit of expansionary fiscal policy which would provide a floor to growth,” Bloomberg quoted Credit Suisse economist Michael Wan as saying. “We do still expect global growth to pick up, but the risk to that is obviously on the downside if you do see China continue to weaken as we move into 2016."