Singapore’s slow growth raises recession risk

Singapore is often seen as a bellwether for the health of the global economy, and its slump is evidence that momentum has slowed across Asia. (AFP)
Updated 13 July 2019

Singapore’s slow growth raises recession risk

  • In the second quarter, manufacturing contracted 3.8 percent from a year earlier after shrinking 0.4 percent in the quarter earlier
  • South Korea may also be flirting with recession, while China may report its slowest growth in 27 years

SINGAPORE: Singapore reported dismal preliminary second quarter growth data on Friday, including the slowest pace of annual expansion in a decade, raising bets that a recession and monetary policy easing could be coming.
The quarter’s 0.1 percent gross domestic product (GDP) expansion was below the 1.1 percent forecast in a Reuters poll and the slowest annual growth since 2009’s second quarter, when it fell 1.2 percent.
The trade ministry also said the economy shrank 3.4 percent on a seasonally adjusted and annualized basis — the biggest contraction in nearly seven years compared with a poll forecast of 0.1 percent growth and January-March’s 3.8 percent expansion.
“It is quite disastrous... way below even the worst street forecasts,” said Selena Ling, head of treasury and strategy at OCBC Bank.
The slump in Singapore — often seen as a bellwether for health of the global economy — is the latest evidence that momentum has slowed across Asia as the year-long US-China trade war and sliding growth weigh on the region’s export-reliant economies.
Elsewhere in Asia, analysts say South Korea may also be flirting with recession, while China on Monday is expected to report its slowest economic growth in at least 27 years.
Ling and others say the main drag for Singapore remains the manufacturing sector.
In the second quarter, manufacturing contracted 3.8 percent from a year earlier after shrinking 0.4 percent in the quarter earlier.
Singapore authorities have previously said they will review their 2019 full-year GDP growth of 1.5-2.5 percent, and some analysts say there might be a recession in 2020.
The standard technical definition of a recession is two consecutive quarters of economic contraction. Ling said she expects authorities to soon lower their full-year growth forecast to 0.5-1.5 percent.


3.8% - Singapore’s manufacturing contracted 3.8 percent from a year earlier in the second quarter.

Electronics manufacturing output, the main driver of Singapore’s economy in the last two years, declined for the sixth consecutive month in May while exports saw its biggest decline in more than three years.
Khoon Goh of ANZ, who described Singapore’s economy as at a “stand-still” in the second quarter, said in a note that with global trade “still reeling” from trade tensions and broader global slowdown, downside growth risks remain.
In a Reuters poll done after release of the Q2 data, seven of 11 economists said they expect the Monetary Authority of Singapore to loosen its exchange-rate monetary policy in its next policy statement, due in October, with the other four forecasting no change.
Jeff Ng of Continuum Economics, who forecast no change, said “There was a one-in-four chance previously that the MAS will ease. Now, it has increased to 40 percent that they will ease on or before October.”

BMW picks insider Zipse as CEO to catch up with rivals

Oliver Zipse
Updated 19 July 2019

BMW picks insider Zipse as CEO to catch up with rivals

  • German giant has lost ground to Mercedes-Benz and Tesla as tech steps up

FRANKFURT: BMW has named Oliver Zipse as its new CEO, continuing the German carmaker’s tradition of promoting production chiefs to the top job even as the auto industry expands into new areas such as technology and services.
Hailing Zipse’s “decisive” leadership style, BMW hopes the 55-year-old can help it win back its edge in electric cars and the premium market  from rival Mercedes-Benz.
But some analysts questioned whether Zipse was the right choice with new fields such as software and services like car-sharing becoming increasingly important.
“What is intriguing is the cultural bias to appoint the head of production. It works sometimes but ... being good at building cars is not a defining edge the way it was 20 years ago,” said Jefferies analyst Philippe Houchois.
Current CEO Harald Krueger, and former chiefs Norbert Reithofer, Bernd Pischetsrieder and Joachim Milberg were all former production heads.
Zipse joined BMW as a trainee in 1991 and served as head of brand and product strategies and boss of BMW’s Oxford plant in England before joining the board.
He will become chief executive on Aug. 16, taking over from Krueger who said he would not be available for a second term.
“With Oliver Zipse, a decisive strategic and analytical leader will assume the Chair of the Board of Management of BMW. He will provide fresh momentum in shaping  the future,” said Reithofer.
Zipse helped expand BMW’s efficient production network in Hungary, China and the US, in a move that delivered industry-leading profit margins.
Under Krueger, BMW was overtaken in 2016 by Mercedes-Benz as the best-selling luxury car brand.
It also had an early lead over US  rival Tesla in electric cars, but scaled back ambitions after its i3 model failed to sell large numbers.
Reithofer initially championed Krueger’s low-key consensus-seeking leadership, but pressured him to roll out electric vehicles more aggressively, forcing Krueger to skip the Paris Motor Show in 2016 to reevaluate BMW’s electric strategy.
Krueger’s reluctance to push low-margin electric vehicles led to an exodus of talented electric vehicle experts, including Christian Senger, now Volkswagen’s (VW) board member responsible for software, and Audi’s Markus Duesmann, who is seen as a future CEO of the company.
Both were poached by VW CEO Herbert Diess, a former BMW board member responsible for research who was himself passed over for BMW’s top job in 2015.
VW has since pushed a radical 80 billion euro ($90 billion) electric car mass production strategy, and a sweeping alliance with Ford.

Other skills
“A CEO needs to have an idea for how mobility will evolve in the future. This goes far beyond optimising an existing business,” said Carsten Breitfeld, chief executive of China-based ICONIQ motors, and former BMW engineer. “He needs to build teams, attract talent, and promote a culture oriented along consumer electronics and internet dynamics.”
German manufacturers have dominated the high-performance market for decades, but analysts warn shifts towards sophisticated technology and software is opening the door to new challengers.
“Tesla has a lead of three to four years in areas like software and electronics. There is a risk that the Germans can’t catch up,” UBS analyst Patrick Hummel said.
Germany’s Auto Motor und Sport car magazine, normally quick to champion German manufacturers, this week ran a cover questioning BMW’s future.
“Production expertise is important, but if you want to avoid ending up being a hardware provider for Google or Apple, you need to have the ability to move up the food chain into data and software,” a former BMW board member said.