Singapore Economy Contracting

At first glance, a 6.6% contraction seems quite bad, but please bear in mind that the 6.6% is a comparison made with reference to the high base in Q1 which saw a 15.6% rise when compared to Q4 2007. Things are not as gloomy as they looks. But will it get worse?

If Q2 figures are low (since it contracts by 6.6%), there is a good chance that Q3 figures may come in higher than Q2, making it possible for Singapore to avoid a technical recession (defined as two consecutive quarters of negative economic growth as measured by a country's gross domestic product), right? Not quite so, actually.

Bearing in mind that Q1 saw a strong growth of 15.6%, the contraction of 6.6% in Q2 only gave up a portion of that growth. So it is still possible for Q3 to surrender more of that growth even if the economy is still doing well.

That brings us to the more important point. If Q3 figures show that Singapore slips into a technical recession, it may well be due to the lower figures of Q2 and Q3 when compared to Q1, not necessary because the economy is not doing well.

Likewise, if Singapore experience a big contraction in a quarter followed by a slight recovery in the subsequent quarter, it does not mean that the economy is fine although we escaped a technical recession.

So what does the technical recession tells us. Nothing much actually, unless we take a closer look at the figures and their comparisons.