Singapore's Q2 GDP shrinks 1.1% on-quarter
-
SINGAPORE: Singapore's economy contracted by 1.1 per cent on a quarter-on-quarter basis in the second quarter of 2012, compared to the 9.4 per cent expansion in the preceding quarter.
On a year-on-year basis, the economy grew at a modest pace of 1.9 per cent, following the 1.4 per cent growth in the previous quarter.
This is according to advance estimates released by the Ministry of Trade and Industry (MTI) on Friday.
The MTI said in its statement that the weakened growth momentum in the second quarter was mainly due to a sequential contraction in the manufacturing sector.
The manufacturing sector declined by 6.0 per cent, reversing the 20.9 per cent expansion in the preceding quarter.
Growth in the services-producing industries remained modest, at 1.0 per cent on a year-on-year basis, following the 1.9 per cent growth in the previous quarter. This was mainly due to contraction in the wholesale and retail trade, as well as the finance and insurance sectors.
While some experts raised concerns of a technical recession in the third quarter, most said that Singapore will continue to see full-year growth that is close to the government's official forecast of between 1 per cent and 3 per cent.
The manufacturing sector was the weakest link last quarter, but for Aldon Technologies, a vendor providing smartphone components to the semiconductor industry, business has been brisk.
Allen Ang, group managing director of Aldon Technologies, said: "We have secured a few new projects, coming from our semiconductor customers who are implementing their cost containment and productivity improvement projects...We are pretty optimistic about business for the next half of the year."
Despite the pessimistic outlook for the electronics cluster next quarter, experts said manufacturers that supply component parts to support the production of smartphones and other mobile devices will continue to fare better than others.
Still, external factors will continue to weigh heavily on the manufacturing sector.
Satish Lele, vice president for Asia Pacific at Frost & Sullivan, said: "Overall manufacturing will continue to be not so strong and will continue to follow the trend in the second quarter. China is slowing down particularly in manufacturing, India is slowing down much faster, and of course, US and Europe are not doing well since the beginning of the year, so all this is compounding the whole issue as far as manufacturing is concerned."
Meanwhile, a drop in biomedical manufacturing output also more than offset gains in the transport engineering cluster.
But some economists are confident that the biomedical cluster will rebound.
Irvin Seah, senior economist at DBS Bank, said: "In the third quarter of this year, we will probably see a benign positive quarter-on-quarter growth because we could see a ramp-up in pharmaceutical production. Do bear in mind that because of the cyclical and volatile nature of this particular segment, a down cycle in the pharmaceutical industry usually won't last more than one quarter."
Meanwhile, Trade and Industry Minister Lim Hng Kiang said he is confident Singapore's economy will grow in line with the official estimates of between 1 per cent and 3 per cent for the entire year.
Speaking on the sidelines at the opening of a research facility on Friday, Mr Lim said the eurozone debt crisis and the economic slowdown in China and the US had impacted Singapore's economy in the last quarter.
But Mr Lim remains optimistic for the year because leading economic indicators in Singapore are steady, while business confidence is high.
He said: "For electronics, we are still quite positive because if you look at the book-to-sales ratio, it is still above one. So that is very positive.
"The slowdown this second quarter is the result of the very volatile biomedical sector. This is part and parcel of our landscape. The biomed sector will recover for the rest of the year."
- CNA/de/ms -
Lots of jobs available.
