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Singapore Q2 GDP grows 0.4 percent from last quarter, dodges recession

Singapore's economy grew in the second quarter, narrowly dodging a recession thanks mainly to robust growth in its electronics and precision engineering industries due to strong global demand for semiconductors and semiconductor manufacturing equipment.

The economy expanded at 0.4 percent in the April-June period from the previous three months on an annualized and seasonally adjusted basis, the Ministry of Trade and Industry said on Friday in a statement. As revisions to first quarter data showed, the economy contracted by 1.9 percent in January-March, weakening more than the earlier estimate of a 1.3 percent contraction.

Shophouses line many streets in downtown Singapore.
Brynne Rinderknecht
Shophouses line many streets in downtown Singapore.

The April-June quarter-on-quarter growth was lower than a Reuters poll's median forecast of 1.1 percent, but analysts said it was still in line with their overall growth forecast for the city-state.

Gross domestic product grew 2.5 percent in the second quarter from a year earlier, unchanged from a revised first quarter growth figure, and below the median forecast of 2.8 percent growth.

"It is softer than expected, mainly due to construction being rather weak... but the Q2 story is consistent with what we anticipated, but in a more nuanced way, which is a slight easing in manufacturing, and an offset from services," Vishnu Varathan, economist at Mizuho Bank, said.

Singapore has been among a number of export-reliant Asian economies to benefit from a general uptick in global demand since late last year, enjoying strong sales of its tech products.

It looks to be that way, analysts say, thanks to new products to be launched by Apple.

Analysts have voiced concern about the sustainability of Singapore's growth, as it is dependent on electronics, but growth in services may offset any moderation.

"Going forward we may see the growth story broadening to services," said OCBC analyst, Selena Ling.

Data released last month had pointed to a recovery, as manufacturing output in May grew from a year earlier for a tenth successive month.

Economists surveyed by Singapore's central bank last month raised their 2017 Singapore growth forecasts, upgrading their views on manufacturing and bank lending.

A majority of analysts believe that the Monetary Authority of Singapore (MAS) will keep monetary policy steady when it holds its next policy meeting in October.