Singapore’s economy shrank by a jaw-dropping 19.8% quarter-on-quarter during Q3, according to data released by the Monetary Authority of Singapore yesterday.
While GDP was still 10.3% higher than the same quarter last year, the quarter-to-quarter contraction was the worst ever, and is a reminder of how volatile Singapore’s economic output can be:
According to DBS Bank, this is a record sequential contraction and one that is worse than the supposedly “free-fall” in GDP experienced in the recent US financial crisis, the slump during the dot.com bust as well as the doldrums during the Asia financial crisis.
The drop was caused primarily by a sharp reduction in output from the pharmaceutical industry:
Indeed, noted DBS, growth wouldn’t have fallen by more dramatic fashion than this considering that we had a record expansion not too long ago in the first quarter. Sharp pullbacks in production from the volatile pharmaceutical segment have brought down overall industrial production in recent months. “And the exceptionally high comparison base in 1H10 further amplifies the drop. That is, it’s drug effects plus technical payback!”
Yet it’s all just part of what makes Singapore’s economy such a fun ride, and the island is far from sinking.
The government isn’t concerned, they even just tightened monetary policy yesterday in a bid to cool the economy and reign-in inflation, which is expected to hit 2-3% next year. DBS also still expects Singapore to achieve full-year GDP growth of 15% and has explained that pharma contractions such as the one just experienced don’t normally last more than a quarter.
Still, by the looks of the SBR chart above, this was still a shockingly volatile quarter, even for Singapore.