Singapore slides into recession

Oct 9, 2008
SINGAPORE (AFP) — Singapore's trade-sensitive economy has declined for a second straight quarter, the government said Friday, meaning the city-state has entered a recession for the first time in six years.

On a seasonally adjusted quarter-on-quarter annualised basis, real GDP declined by 6.3 percent in the third quarter after contracting 5.7 percent in the previous quarter, estimates from the Ministry of Trade and Industry said.

It did not describe the economy as being in recession, but a technical recession is generally defined as two consecutive quarters of quarter-on-quarter contractions in economic output.

Economists polled by Dow Jones Newswires had forecast a 0.3 percent quarter-on-quarter rise in gross domestic product (GDP), the value of goods and services produced in the economy.

Singapore's last technical recession occurred in 2002, and the most recent full-scale recession was in 2001 when the economy contracted 2.4 percent during the year.

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Angela Balakrishnan
Friday October 10 2008 11.35 BST

Economy heavily dependent on exports to developed world is one of the first in Asia to be hit by global slowdown

Singapore officially slid into recession today after falling consumer demand from the US and Europe hammered its manufacturing exports.

The south-east Asian country's economy contracted by 6.3% in the third quarter, on an annualised seasonally adjusted basis, having shrunk by 5.7% in the second quarter of 2008. This forced the government to cut its growth forecast for this year from 4%-5% to 3%. Analysts had expected a small rise in GDP.

"There's no question that growth will continue to slow down," said Yuwa Hedrick-Wong, economic adviser in Asia for MasterCard Worldwide. "2009 will likely be a very difficult year."

Singapore's economy, which is heavily dependent on exports to the developed world, is one of the first in Asia to be hit by a global economic slowdown. Following the rampant growth of China and India, many analysts believed Asia was well positioned to weather the storm.

But Asia relies on the west for trade, so slowing US and UK economies hit growth.

Along with markets worldwide, Singapore also experienced the gloom of Black Friday with stocks closing 8% lower earlier today

Singaporean manufacturing sector shrank by a hefty 11.5% in the third quarter, driven by a slump in pharmaceuticals. Construction and services activity maintained steady growth.

Prime minister Lee Hsien Loong said Asian economies faced slowing growth for at least the next year and will not be spared in this global crisis.

"The problems facing financial institutions in the US and Europe are complex and grave," he said in a speech. "Asian countries cannot avoid the impact of weakening US, European and Japanese economies."

"The world is caught up in a financial storm, and dark clouds fill our immediate horizon. The fear and panic gripping financial markets everywhere will take time to subside."

Singapore's central bank, known as the Monetary Authority, today shifted its foreign exchange rate policy to a "zero per cent appreciation" of the Singapore dollar from a "modest and gradual appreciation" in a bid to boost the competitiveness of the country's exports.

The government said last month that non-oil exports plummeted 14% in August after a 5.8% fall in July.

"A strong Singapore dollar has been quite detrimental to growth, especially manufacturing," Hedrick-Wong said. "It's much better to take a risk with inflation and deal with growth by making the Singapore dollar weaker and support exports."

Last month Ireland became the first member of the eurozone to fall into recession.

guardian.co.uk © Guardian News and Media Limited 2008

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