Singapore in technical recession, well almost

Written By: Tiang Chuan on October 11, 2008 No Comment

Singapore is now in technical recession, according to advance Estimated figures from the Ministry of Trade and Industry. You can access the report: MTI revises 2008 Growth to around 3.0 percent. Highlights of the report are:

3rd quarter GDP shrank by 0.5% over the same period last year (y-o-y or year on year)
3rd quarter seasonally adjusted, annualised quarter-on-quarter (q-o-q) GDP shrank by 6.3%
This is following a 2nd quarter seasonally adjusted, annualised q-o-q negative growth of 5.7%

What does all this mambo-jumbo mean?

Point 1, the year-on-year retraction of 0.5% means that compared to the same 3rd quarter last year, the GDP shrank by 0.5%. This mode of comparison offers the advantage of comparing similar time periods as GDP figures can be affected by seasonal reasons. For example, the figures for the Q4 are affected by Christmas and the festive season Thus, this number is not seasonally-adjusted as they are compared as it is. A quarter of unusual growth (eg, affected by war in the Gulf) can cause unusually high or low numbers in the subsequent corresponding quarter.

The seasonally adjusted, annualised q-o-q growth of -6.3% in point 2 means that the GDP shrank by 6.3% compared to the Q2 of this year. The per quarter figure is seasonally adjusted by statistical methods and annualised to produce the seasonally adjusted, annualised q-o-q growth figures. Annualising simply means that the figure is extrapolated on the assumption that the economy grows at the same rate over 1 year.

As in Q3, Q2 GDP figures are also negative (-5.7%). Thus, we are in recession by definition as recession is defined as 2 consecutive quarters of negative growth. This is also known as a technical recession. However, there might be a tini-winni chance of avoiding recession this year as the figures are estimated from July and August figures. If the final Q3 results are not negative, then there will not be a recession this year as a negative Q4 growth would not result in a consecutive quarter of negative growth.

All this technical definition can mean little to us. What most of us would be concerned is: am I facing a depression. The following quote sums it up nicely: