Singapore cuts GDP forecast, says economy could contract in 2009

Singapore cuts GDP forecast, says economy could contract in 2009

 

SINGAPORE: 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.

 

Next year, the city-state expects its GDP to range between a contraction of 1.0 per cent and growth of 2.0 per cent, in view of increased uncertainties in the external environment.

 

In a statement released on Friday, Singapore’s Ministry of Trade and Industry (MTI) said it has also moderated the GDP growth forecast for 2008 downwards to around 2.5 per cent.

 

This year’s growth forecast was earlier revised from 4 to 5 per cent to around 3 per cent in October.

 

MTI said economic growth in the developed economies had slowed down, with several countries already in recession.

 

Consumer and business confidence indicators across the major economies are weak. The contraction in global demand has hit regional economies too.

 

As a result, Singapore’s trade volumes and other indicators of regional demand, including visitor arrivals, have fallen.

 

MTI said all these developments would further dampen Singapore’s economic growth in the remaining months of 2008.

 

In releasing its third quarterly report, MTI said Singapore’s GDP contracted by 0.6 per cent in year-on-year terms.

 

On an annualised quarter-on-quarter basis, growth declined by 6.8 per cent, compared to a fall of 5.3 per cent in the second quarter.

 

MTI said the largest contraction came from the manufacturing sector, with the decline led by the electronics and biomedical sciences (BMS) segments.

 

It said growth in the services sector had started to moderate. Services-producing industries grew by 5.3 per cent in the third quarter, compared to 7.1 per cent in the previous quarter.

 

MTI said the plunge in stock markets worldwide since mid-September and disruptions in the global credit markets started to affect many of the services and trade-related sectors, especially financial services, wholesale trade, and transport and storage.

 

It added that Singapore’s economy is expected to face a broad-based slowdown in 2009, with the financial services sector expected to remain weak in 2009.

 

For 2009, inflation has been revised downwards from 2.5 to 3.5 per cent to 1 to 2 per cent, due to falls in global commodity prices and the lower than expected annual values of public housing properties.

 

The Monetary Authority of Singapore says it is comfortable with the current monetary policy stance, and has no plans to change it before the next review.

 

Source: Channel NewsAsia