Singapore could face recession risk in H2

A possible annualized contraction is likely to hit the Singapore economy in the second half of this year due to the global economic downturn, but the country remains to course on becoming one of the fastest growing countries in the world.

The Singapore government remains firm on its 2010 growth forecast of between 13 percent and 15 percent, its strongest yearly expansion, as an increasing influx of tourists and surging demand for electronics will offset a decline in biomedical production due to a possible shift in output mix and plant maintenance shutdowns.

“It is possible that we could have two quarters of negative sequential growth, which would qualify as a technical recession,” said Ravi Menon, permanent secretary of the  Ministry of Trade and Industry.

The country last went into recession two years ago, when the economy contracted from the second to the fourth quarter.

“We see this moderation in growth as a healthy normalisation of economic activities,” said Irvin Seah, an economist at DBS. “And even with the growth momentum slowing down, the Singapore economy is still on track to meet our target of 15 percent growth.”

Gross domestic product from April to June increased 24 percent on an annualized basis, a downward revision from a 26 percent expansion estimated in July.