Due to declining demand from Chinese and European markets, Singapore's manufacturing base suffered in the second quarter, including the construction and service sectors. The overall economy grew 1.7 percent year-on-year, but shrank 4.6 percent quarter-on-quarter from April to June.
According to data from Bloomberg, the third quarter marks Singapore's worst economic performance since Q3 of 2012. The economy suffered a setback across the board, but manufacturing is the primary reason behind Singapore's shortfall, falling 14 percent quarter-on-quarter. On the plus side, the Greek deal may cause EU demand to rise again, but there is no guarantee of this, and the European recovery remains in question. There is also the China problem. Chinese stock volatility is a looming issue that may affect markets going forward. Singapore is also counting on U.S. growth, but American expansion has proved disappointing thus far, placing export-based economies that rely on U.S. demand in a precarious position.
The contraction comes at an inconvenient time, as Singaporeans get ready to celebrate the city-state’s 50th anniversary of independence next month. However, nationalism in Singapore is taking a dark turn. Many blame overseas migrants for job shortages, and some complain of overcrowding in such areas as public transportation. The issue of migrant workers is a touchy topic, and it could be the spark that leads to a general election call within the year. Many foreign workers come to Singapore from such places as India, China or Bangladesh.
Migrants are the scapegoats, but overseas migration is crucial to the fabric of Singapore. The country has over a million foreign workers, and many fulfill duties in shipping and construction. Regardless of local or foreign status, all workers within certain sectors are facing hurdles. The construction sector fell 0.2 percent in the third quarter, while the service sector dropped 2.6 percent.
According to analysts, there is no sign of economic relief when it comes to the world economy, leaving national economies no other choice but to weather the storm. Experts expect the Singaporean central bank to take action to prevent further stagnation, but the bank already imposed easing measures last January. In fact, experts believe authorities will change policy this October in the wake of mounting pressures, such as a low core inflation target and a declining property market. In the meantime, Singapore will continue to get by on its reputation as a business friendly state, but authorities will need to demonstrate economic stability to continue attracting and maintaining investment.