Singapore’s economy could shrink by as much as 1% in 2009

Singapore’s economy could shrink by as much as 1% in 2009

 

Singapore’s economy could shrink by as much as 1 percent next year, the first full year contraction since 2001.

 

Giving its forecast today, the Ministry of Trade and Industry, or M-T-I, says next year’s economic performance will likely come in between minus 1 and plus 2 percent.

 

MTI says Singapore’s economy is expected to face a broad-based slowdown next year, due to increased uncertainties in the external environment.

 

Speaking in a briefing this morning, MTI Permanent Secretary Peter Ong said the ministry expects weak or no growth in many key sectors in the Singapore economy, well into next year.

 

“Our financial services sector will feel the impact more keenly in the next few quarters. Markets will remain volatile in the coming months. In the domestic lending segment, there are already signs of easing in demand for credit alongside the broader slowdown in the economy. The declines in property prices will also affect the real-estate related sectors of the economy. Global travel will also see weak growth next year, which will affect our hotels and restaurants sector, as well as our retail sales.”

 

Mr Ong said the government has lowered its official growth forecast for this year once again — the 4th time this year.

 

It’s now expecting GDP expansion to be around 2.5 percent, down from an earlier forecast of 3 percent.

 

GDP in the third quarter shrank 0.6 percent on-year and 6.8 percent from the previous quarter.

 

MTI said the largest contraction came from the manufacturing sector while growth in the services sector has also started to moderate.

 

Analysts such as OCBC economist Selena Ling say this suggests fourth quarter growth will be negative as well.

 

“We do think that Q4 growth is going to be negative, if anything it’s probably going be a sharper contraction compared to the 0.6 percent drop year-on-year that we saw in Q3. I think it’ll be a combination of a broadbased weakness. Manufacturing is obviously going to be weak due to the holiday season weakness and then on the services side also because of all the bad news that we’ve been hearing out of the equity markets and from the corporate sectors as well.”

 

Despite the weak outlook, the government said the fundamentals of the economy remain strong and that Singapore continues to have a strong pipeline of investments.

 

In fact, the Economic Development Board says it’s on track to meet the fixed asset investment target of 17 to 19 billion dollars set at the start of this year.

 

The labour market however is expected to come under increased pressure given the fragile economic conditions.

 

MTI expects the jobless rate to climb next year with more layoffs to come, especially in the financial and manufacturing sectors.

 

Source: 938Live