Wednesday, December 10

Economists cut 2008 forecast to just 2.2%

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Private sector economists drastically cut 2008's growth forecast
By Rachel Kelly, Channel NewsAsia

SINGAPORE: The Singapore economy is expected to grow just 2.2 per cent this year, according to a central bank survey of private sector economists. This is nearly half the 4.2 per cent clip they predicted just three months ago.

The economists are also predicting a 1 per cent contraction for the economy – the first in eight years.

The turmoil in financial markets in October and November this year has triggered spillover effects on the global economy.

In the last survey in September by the Monetary Authority of Singapore (MAS), economists had thought the economy would grow around 4.2 per cent.

But with the collapse of US investment bank Lehman Brothers and financial problems at major Wall Street names, the outlook has become gloomier.

Market-watchers now expect the Singapore government to step in to buffer the slowdown.

Vishnu Varathan, regional economist, Forecast, said: "A very close watch factor would be how much of fiscal stimulus the government is aiming for the Singapore economy, and what form it will come in ... and what way it will be done."

Just a month ago, the government reduced its growth forecast for the economy to 2.5 per cent this year, down from an earlier estimate of 3 per cent. For next year, the survey showed that non-oil domestic exports will shrink 9 per cent.

Although economists said the construction sector is one sector due to see growth next year, they noted that this would not be enough to offset heavy falls in sectors such as manufacturing.

The key manufacturing sector is expected to contract 4.5 per cent. But the good news is that inflation will ease to around 1.7 per cent in 2009, compared with the expected 6.5 per cent this year.

Irvin Seah, economist, DBS Bank, said: "I think the fact that inflation is showing signs of easing is a very good for consumers, especially for the lower income group. High food prices would have squeezed their pockets."

On the labour front, the unemployment rate is expected to climb to 3.4 per cent next year.
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