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Is Singapore Heading Into A Recession?

Singapore’s economy could be facing tougher times ahead.

In the second quarter of this year,  the unemployment rate rose to a two-year high of 2.1%.

The Monetary Authority of Singapore, the country’s central bank, is expected to hold its monetary policy steady when it announces its latest policy decisions later this week. Many economists are expecting the central bank to be saving up reserves to tackle any economic problems in Singapore that may surface next year.

Are we really heading for more troubled times ahead? Let’s take a look at the latest results from some of Singapore’s largest companies to see how their businesses are doing here.

The telecommunications giant

The latest set of results from Singapore’s second-largest telecommunications company StarHub Ltd (SGX: CC3) is for the second quarter of 2016.

Although the company experienced a slight decline in revenue during the quarter, its bottom-line did not suffer the same fate. Due to improved margins and stable operating expenses, StarHub actually saw a 9.6% year-on-year improvement in profit in the second-quarter of 2016.

For StarHub at least, the picture is not as depressing as the economists are predicting with Singapore’s general economy. But, the declining revenue is definitely something investors want to keep an eye on.

The aviation giant                                                         

Singapore’s flagship carrier, Singapore Airlines Ltd (SGX: C6L), is in an industry many investors love to hate. Yet, the past few quarters were probably some of the best for the company over the last few years.

Due to lower fuel costs and stable operating expenses, SIA saw its net profit in the second-quarter of 2016 soar 281% compared to a year ago. But, in a similar manner to the situation StarHub is in, the profit improvement did not come from revenue growth and that might be a worrying sign.

The banking giant

Singapore’s largest bank by assets is DBS Group Holdings Ltd (SGX: D05). The bank experienced a 6% drop in profit in the second-quarter of 2016 due to higher bad debts that surfaced.

But, it is not all bad news for the banking giant. Its revenue for the first- and second-quarter of 2016 actually improved compared to the previous year. Given the bank’s close ties to the Singapore economy, this could be an indication that things may not be as bad as it seems.

Foolish Summary

Economists are painting a very dark picture for Singapore’s near term future. But, as we saw from some of the major companies in three important economic sectors in Singapore, there are green shoots of hope.

Certainly, there are challenges ahead, with lower revenue for some companies and perhaps higher bad debt provision for others. But the latest results from some of Singapore’s largest companies also show some positive takeaways.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim does not own shares in any companies mentioned.