Q3 technical recession unlikely but not unthinkable: OCBC

The bank predicts Singapore's Q3 GDP to grow at 2.4% yoy or well clear of the 1.5% technical recession threshold but an Asia-led drag still looms.

"Looking ahead, our forecast for Singapore’s Q3 GDP growth is 2.4% yoy (+3.6% qoq saar), with our full-year growth forecast also trimmed slightly from 2.7% yoy previously to 2.3% yoy, to factor in the weaker-than-expected Q2 flash data and also the sharper softening in services momentum," said OCBC in its Asia Outlook H2 2012 report.

"For a technical recession to occur in Q3, headline growth has to sink below 1.5% yoy. However, given the resurfacing of Eurozone debt concerns and many leading indicators like the global PMIs starting to point south again, the risk of a technical recession in Q3, while small, cannot be fully ruled out at this juncture, as much would depend on the external growth environment, especially for Asia, given the drag on manufacturing and the slowing of the services engines of growth. Headline inflation eased from 5.4% yoy in April to 5.0% in May, and may moderate further in H2 given the sharp pullback in crude oil prices," it added.

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