Is Singapore Going Through a Recession? Wait, What’s a Recession?

singapore recession meaning

Recently, there’s been much talk about an impending recession in the news. The crypto market has crashed. The stock market in a close second. Recession is an alarming word. 

With all these articles swirling around, it’s difficult to get a handle on exactly what’s happening. Singapore’s central bank has released a statement that it expects global growth to moderate to 3.9% in 2022 from 5.4% last year as inflation continues to rise.

But what do these numbers mean anyway? What on God’s green earth is a recession, and are we actually in one?

What is a “recession”?

There’s no official body that governs the definition of “recession”, which means the term, unfortunately, can sometimes be bandied about for political or fear-mongering purposes.

Here’s what the Oxford English Dictionary says:

“A period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.”

A decline in GDP over at least 6 months? That seems pretty straightforward. 

But when I dug a little deeper, it seems there’s a lot more to a recession than just the GDP. According to US personal finance sites The Balance and Investopedia,

  • Not only does there need to be a decline in GDP, the decline should be significant 
  • Apart from GDP, you would also see declines in 4 other indicators: employment, income, manufacturing and retail sales
  • Declines in these 4 indicators (which can be measured any time) are usually detected before a fall in GDP (which is measured quarterly)

So even without a 6-month drop in GDP, a country may be considered to be in recession if there are drops in the 4 indicators above.

The things that happen in the global economy are deeply impactful to Singapore’s economy. The trickle down effects from the decisions made by foreign central banks can most certainly be felt by Singapore. At the May Day Rally last month, Prime Minister Lee Hsien Loong raised the point, stating that “inflation will remain high; central banks in the developed countries are tightening their monetary policies, raising interest rates; global growth will be weaker, and there may be a recession within the next two years.”

 Given all the information on hand, it would definitely seem like Singapore might face a recession in the next two years.


Why do recessions happen though?

The very idea of a recession may seem apocalyptic. Even if you didn’t think so, both the popular media and your friendly neighbourhood kopitiam uncles will do their best to convince you that the end is nigh.

But if you’ve studied economics, recessions are actually part of the normal economic cycle and don’t necessarily indicate that there’s something wrong with the economy.

For background, the general trend for most countries’ economies is always upwards — it’s normal to become more prosperous and productive over the long term. But in the short term, there are fluctuations, so there are always periods when a country’s economy will slow down or even decline, i.e. go into recession. 

These are typically brought on by events not entirely within the regular person’s control. For example, the big financial crisis and subsequent recession in 2008 was famously brought on by the collapse of Lehman Brothers (and other major banks) in the US. 

The upcoming recession in Singapore is said to be due to a multitude of reasonsThere’s an ongoing war between Russia and Ukraine.  The Fed has announced interest rate hikes – a historical rate hike in 28 years – to combat inflation. China is still on a tight Covid-19 lockdown. Unfortunately, being vulnerable to these faraway disputes is part and parcel of an export-based economy like ours.

If it’s any consolation to you, most economies recover from recessions in 1 or 2 years and then go back to the usual upwards trend.

Nonetheless, there are many lives that are irrevocably and painfully changed in every recession. Entire companies shut down, whole teams get laid off, blue chip stocks suddenly dip — it’s definitely a painful time for most of us.


What happens during a recession?

It’s not the end of the world. Before you sink into a rabbit hole of impending doom, there’s always light at the end of the tunnel. Gathering as much information as you can is the best that you can do. So, here we go:

For a start, a recession is usually synonymous with retrenchment and unemployment. This is because businesses aren’t making as much money as they need to, so naturally they have to “reduce headcount” to lower their costs of operation.

During the 2008 financial crisis and recession, DBS famously let go of 900 people, while numerous companies cut wages and even forced staff to go on leave to reduce their costs. (Note that 2008 was an exceptionally bad recession — even Temasek Holdings lost money!!! — and I doubt the upcoming one will be as bad.) 

We’re already seeing signs of this happening. Elon Musk has said that he will laying off 10% of his staff on payroll. Crypto company Coinbase has laid off 18% of its staff. While the effects are not yet felt in Singapore, it is but a matter of time.

It’s not just the currently-employed who will be affected by the lousy job market though.

Students on the verge of graduation might also find it difficult to get employed fresh out of school, too. Business owners will also feel the pain of making ends meet; it’s no surprise that many businesses do go bust during a bad recession.

The newly-unemployed may find themselves having to give up their homes if they’re unable to pay off their mortgage. Downsizing homes is common during a recession. Both my parents were retrenched in the 2008 recession, and we sold the family home to move to a smaller place.

Meanwhile, investors tend to lose confidence in blue chip listed companies during a recession, especially those who are visibly hit. Therefore, the stock market usually declines into a bear market, with share prices dropping as people let go of their stocks


Is there any silver lining to a recession?

One oft-cited upside of a recession is that it usually curbs inflation, but unluckily for us, inflation is expected to remain above its historical average this year, which only makes everyone more miserable. However, if the recession holds off till next year or the year after, it could be another story. 

Most Singaporeans who are hit by the recession will look to the government for a stimulus package to help tide us through the bad times.  

In the 2008 recession, this consisted of $23.4 billion in spending, mainly on a “Resilience Package” to help laid-off Singaporeans find jobs, help struggling businesses and so on. If history is anything to go by, you can be rest assured that you will be extended a helping hand in one way or another.  


Can you make money from a recession?

Although recessions are really shitty for most of us, there will always be people who manage to profit during these times. 

I mentioned that stock markets will turn bearish, and this is an opportunity for risk-taking investors to buy shares while prices plunge. They then hold these stocks all the way until the market recovers, to sell them at a tidy profit. 

The same goes for property. If you’re (miraculously) financially capable of affording a new home, deep in a recession may be a good time to buy as property prices are usually depressed. 

Still others may profit by buying assets like gold or silver at pre-recession prices, since many investors like to drop their stocks and buy these “safe haven” assets when the economy is bad. 

In any case, if you are looking to profit from a recession, know that the risks are definitely real. You have no idea how long you’ll have to hold the asset for — it could be months or years — and the prices of whatever you invest in could continue to plummet for some time. It definitely takes guts of steel to do this.


How else should Singaporeans prepare for a recession?

With the looming threat of retrenchment, unemployment or “reduced” employment, it’s best to not feel too complacent about our careers at this point. Now is a good time to make yourself visibly useful at work, upgrade your skill set, pursue that side gig you’ve always wanted to try, and/or research other careers you might possibly be interested in.

Not saying it’ll happen to you, but you should definitely be prepared for your finances to take a hit.

Do review your financial portfolio and weed out any volatile investments and outstanding debts that you have right now. You should do your best to clear them while you can, before the recession really hits.

Now is also a good time to cut back on your spending and borrowing, while shoring up more cash in your emergency fund. The over-leveraged are the ones who will feel the most pain during a recession; don’t be one of them.

What’s your recession battle plan? Tell us what you think in the comments.