SINGAPORE’S economy shrank in the second quarter of the year, official data showed Tuesday, as slowing demand from key export markets China and Europe hit manufacturing.

    The 4.6 percent quarter-on-quarter contraction in April-June reversed a growth rate of 4.2 percent in the previous three months, according to advance estimates from the trade ministry based largely on two months’ data.

    And despite the figures showing the economy expanded 1.7 percent year on year in the second quarter, private economists immediately downgraded their forecasts for the full year.

    “The advance Q2 GDP estimate was weaker than market expectations,” said Rajiv Biswas, Asia Pacific chief economist at IHS.

    “The contraction... reflected declines in output across the board in manufacturing, services and construction, dampening the mood ahead of the SG50 celebrations,” he said, referring to the 50th anniversary of Singapore independence next month.

    Biswas said a key factor in the weak figures was a 14 percent quarter-on-quarter contraction in the manufacturing sector and a 4 percent year-on-year shrinkage.

    “Singapore’s industrial production has been very weak in recent months... reflecting weakening demand from China and the EU (European Union),” Biswas added.

    He added however that the deal reached between the European Union and Greece for a third bailout package “may help to limit downside risks for Singaporean exports to the EU as well as removing the near-term contagion risks to Singapore and the rest of Asia that could have arisen” if Greece exited the eurozone.

    DBS Bank said Singapore’s economy was also affected by a domestic labor crunch as the government implemented measures to curb the inflow of foreign workers.(SD-Agencies)