Singapore’s GDP shrinks 0.8% in 2Q

Growth continues to slow.

Singapore’s economy is ridden with economic indicators pointing to a flattish growth trajectory ahead, but could avoid a technical recession if exports stabilise in 3Q.

According to a report by OCBC, full-year growth forecast has been pared from 3.5% to 3.3%. MAS narrowed its 2014 headline CPI inflation forecast from 1.5-2.5% to 1.5-2.0% year on year, while maintaining its 2-3% core inflation forecast.

Here’s more from OCBC:

Bank loans growth continued to moderate from 13.0% yoy in May to 12.3% yoy in Jun, as both business and consumer loan growth eased to 16.2% and 6.5% yoy respectively. Business loans fell on month for the first time since Nov 2012 by 0.3% mom, amid slower activity for general commerce, transport and storage, and manufacturing industries. Manufacturing loans growth had declined on-year for four consecutive months, as electronics remained in the doldrums.

However, the business expectations survey suggest that a net 13% of services firms expect 2H business prospects to pick up, compared to 5% a quarter ago, led by the the accommodation (+37%), financial & insurance (+25%), transport & storage, retail sales (+21%), while real estate remained the most bearish at -23% (versus -25% previously).

The unemployment rate was steady at 2.0% yoy in 2Q, as employment gains eased to 22k (-34.7% yoy, -22% qoq) amid the tight domestic labor market conditions. With the 10-year SGS bond re-opening out of the way (cut-off yield of 2.42%), and only a 2-year reopening and new 5-year issue left for 2014, there is subsiding supply concerns but growing focus on US FOMC policy normalization.

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