Singapore’s economy has recorded an unprecedented decline of 19.8 percent quarter-on-quarter, the worst quarterly drop since 1975, according to the Monetary Authority of Singapore (MAS).
This is a record sequential contraction and worse than the “free-fall” in GDP suffered in the recent US financial crisis, the collapse during the dot.com bust and the doldrum during the Asian financial crisis, said DBS Bank.
Overall industrial production declined due to sharp pullbacks in production from the pharmaceutical segment. “And the exceptionally high comparison base in 1H10 further amplifies the drop. That is, it’s drug effects plus technical payback!”
“But isolating these volatilities, Singapore’s underlying growth momentum is slowing and much in line with the normalization process in Asia with the V-shaped recovery turning into a square root shape. And more than ever before, the prospect of the Singapore economy is more closely tied to Asia than anywhere in the world. Hence, this normalisation process that is currently underway in Asia will soon be manifested in Singapore’s economic growth numbers, except with some doses of volatilities coming from the pharmaceutical industry from time to time. Our full year GDP growth remains at 15 percent,” noted DBS.
In another surprise move from the MAS, it has widened the width of the Sing NEER policy band and steepened the band’s slope. While this could reflect the authority’s general optimism in terms of growth prospects, it is also a pre-emptive measure to tackle inflationary concerns in future. It focuses on inflation in the months to come as external inflationary pressure will likely pick up on higher prices of commodities, noted DBS.