Nov 21, 2008
S'pore cuts GDP forecast
Economy could shrink in 2009.
SINGAPORE on Friday further downgraded its growth forecast for this year and said the economy could contract in 2009, after weaker than expected third-quarter GDP figures.
The economy shrank at a worse-than-expected rate of 6.8 per cent on an annualised and seasonally adjusted basis in the third quarter, final government data showed on Friday, confirming the export-dependent country's first recession since 2002.
The government forecast full year 2008 growth at around 2.5 per cent, from a previous estimate of 3 per cent.
Economists had expected the data to confirm a previous government flash estimate of a 6.3 per cent contraction on an annualised seasonally adjusted basis. The median of forecasts by eight economists was for full-year GDP growth of 2.3 per cent.
Singapore was the first country in Asia to fall into a recession, usually defined as two consecutive quarters of economic contraction, with Japan and Hong Kong having followed.
A Ministry of Trade and Industry statement on Friday said the economy will expand 2.5 per cent in 2008, lower than an October forecast for 3 per cent growth and less than a third of 2007's pace. The economy, already in recession, may shrink by as much as 1 per cent next year, the first time since 2001.
Singapore will announce its next budget in January, a month earlier than planned, as Prime Minister Lee Hsien Loong warned the economy may experience several years of slow growth.
'There is a degree of urgency needed to implement expansionary policies to address the weakening economy,' Mr Joseph Tan, the chief economist for Asia at Credit Suisse Private Banking in Singapore told Bloomberg news.
'The government knows it can't do much about external demand so the focus will be to pump-prime the economy through domestic sources.'
Gross domestic product contracted an annualised 6.8 per cent in the third quarter from the previous three months, after shrinking a revised 5.3 per cent between April and June, the trade ministry said in a statement today. That was more than the median forecast of a 6.3 per cent decline in a Bloomberg News survey of 10 economists, which was the same as the government's estimate in October.
Overseas shipments in the first 10 months of 2008 were about 6 per cent lower compared to the same period last year, already worse than the government's forecast for a full-year decline of as much as 4 per cent.
The manufacturing industry, which accounts for a quarter of the economy, contracted a revised 11.4 per cent last quarter from a year earlier, compared with a revised 5.2 per cent drop in the previous three months, Friday's data showed.
The production slump has led to widening losses at companies including Chartered Semiconductor Manufacturing Ltd, the world's third-largest made-to-order chipmaker, and prompted some to cut jobs. Three-quarters of the 2,000 workers retrenched in Singapore last quarter were from the manufacturing industry.
Singapore's services industry also slowed as the global credit crunch hurt financial companies, tourist arrivals dropped and consumers cut back on spending. Services climbed 5.3 per cent in the third quarter from a year earlier, slowing from a revised 7.1 per cent pace in the previous period.
The construction industry grew 12.8 per cent, easing from a rate of 19.8 per cent in the previous quarter. The building industry is facing labour and equipment-shortage constraints, and developers are delaying the introduction of new properties as prices fall. -- REUTERS, AFP
This news confirmed what had been expected all along. In fact, it has been priced into the market already. The drop was mainly attributed to the manufacturing sector with regards to the biomedical centre. Singapore is highly dependent on exports and with the US economy in doldrums, it is expected that manufacturing activities will be taking a hit.
I noticed that it is quite strange that majority of those who were retrenched in the last quarter were from manufacturing and not from financial services. After all, most of the news about retrenchment in the press came from banks and other financial firms.
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