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Singapore releases third quarter GDP data, Monetary Policy Statement

Gantry cranes stand at the Port of Singapore in Singapore, Friday 12th. July 2019.

Ore Huiying | Bloomberg | Getty Images

Singapore's economy – often viewed as a time for global growth – avoided a technical recession after growing by 0.6% in the third quarter, compared to the previous three months.

This quarter-to-quarter expansion marked a reversal from the revised 2.7% decline in the April to June period, official preliminary estimates from the Department of Commerce and Industry showed Monday. On an annual basis, Singapore's economy grew 0.1[ads1]% in the third quarter.

But the latest growth figures were below expectations. Economists polled by Reuters had expected that Singapore's gross domestic product from July to September would increase by 1.5% quarter-on-quarter and 0.3% year-on-year.

A technical recession occurs when there are two quarters in a row of economic contraction. Talks about a global recession have risen in recent months amid a US-China trade war that has been going on for more than a year.

I don't think we're out of the woods. I am still concerned that there is a broad global decline and that places like Singapore do not seem to be coming out of it now.

Anthony Raza

UOB Asset Management

Singapore, a small country in Southeast Asia has one of the highest trade-to-GDP ratios in the world. This makes the economy very sensitive to global trade flows and business cycles.

In many economies where production and trade have moderated in the midst of the American trade war, consumer spending has kept pace. But in Singapore, both goods-producing and service-producing industries have been affected.

"The global decline is affecting Singapore in all areas," Anthony Raza, head of multi-division strategy at UOB Asset Management, told CNBC's "Squawk Box Asia" on Monday.

"I do not think we are out of the woods. I am still concerned that there is a broad global decline and that places like Singapore do not seem to be coming out of it as of now," he added.

Central Bank Relief

In a separate announcement on Monday, the Singapore Central Bank said easing monetary policy by reducing the slope of the dollar-denominated bond for Singapore – referred to as the nominal effective exchange rate for Singapore dollars, or S $ NEER.

The Singapore Monetary Authority adjusts its monetary policy by controlling the exchange rate of the Singapore dollar against a basket of currencies from the major trading partners. The slope, width and center of the police band, as well as the currencies against which the Singapore dollar is measured, have not been revealed.

The central bank announced on Monday that there is no change in the breadth and center of the Singapore dollar trading band. This means that the central bank has moderated the pace at which the local currency will appreciate against the currency basket.

MAS warned that global growth "is expected to slow noticeably in 2019 compared to the previous two years" before stabilizing next year. This means that some weakness in the Singaporean economy is likely to persist, especially in electronics manufacturing, the central bank said. Meanwhile, some domestic-oriented sectors such as education, health and social services should remain resilient, it added.

Singapore's GDP growth is projected to come "around the center" in the official 0-1% forecast, MAS said.

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