Singapore Economy Shrank 4.2 pct

AFP – 26 February 2009, Singapore

Singapore's economy, already in recession, shrank 4.2 percent in the fourth quarter of 2008 from a year earlier, with overall annual growth coming in at 1.1 percent, the government said Thursday.

The Ministry of Trade and Industry (MTI) maintained its 2009 forecast of a gross domestic product (GDP) shrinkage of 2.0 to 5.0 percent amid fears the contraction may worsen if the global situation deteriorates further.

"Singapore's GDP growth prospects appear weak in 2009 on account of the pessimistic global economic outlook... the Singapore economy will experience continued deterioration in the near term," the ministry said.

The 1.1 percent figure for overall annual growth in 2008 is lower than the government's estimate of 1.2 percent and sharply contrasts the revised 7.8 percent growth figure for 2007.

Last quarter's economic contraction of 4.2 percent was worse than the preliminary estimate of a 3.7 percent decline released in January.

On a seasonally adjusted annualised quarter-on-quarter basis, GDP declined 16.4 percent in the fourth quarter, slightly better than the previous estimate of a fall of 16.9 percent, the ministry said in its economic survey.

"The economy is likely to continue to perform weakly in the first half of 2009," the ministry said. "The spillover effects of the global crisis will have an impact on many sectors."

During the fourth quarter of 2008, the country's key manufacturing sector declined 10.7 percent annually and 21.3 percent on a seasonally adjusted annualised quarterly basis.

For all of 2008, the manufacturing sector fell 4.1 percent compared with a 5.9 percent expansion in the previous year.

The sector is being hit especially hard by the steep drop in export demand from Singapore's main markets including the United States, which is mired in its worst crisis since the Great Depression of the 1930s.

In particular, Singapore's electronics industry has seen orders evaporate rapidly as American consumers and households in other major economies hold back on spending.

Pharmaceutical output has also fallen in Singapore, which in October became the first Asian economy to sink into a recession after two straight quarters of contraction.

"The manufacturing sector will likely be weighed down by declines in global demand for electronics products, pharmaceuticals and chemicals," the MTI said.

Economists are anticipating a sharp slowdown in the first quarter.

Singapore's DBS Bank said in a note after Thursday's announcement that the outlook for the economy was "looking gloomier than ever, especially for the export-dependent manufacturing sector."

Oversea-Chinese Banking Corp economists have cut the 2009 outlook to a contraction of 4.8 percent and are tipping an annual drop of 6.1 percent for the first quarter.

Prime Minister Lee Hsien Loong said earlier this week the economy could shrink by more than five percent in 2009 if the global downturn worsened.

Singapore's economy is heavily driven by trade, which makes the city-state vulnerable to any downturn in its major export markets.

Its worse recession so far since independence in 1965 occurred in 2001 when the economy contracted by 2.4 percent.