Singapore seen as emerging Asia's weakest economy

HONG KONG: Singapore is poised to be emerging Asia's worst-performing economy next year, when it is likely to remain entrenched in recession as the global downturn erodes demand for its exports, a Reuters poll shows.

The poll predicts the island state's gross domestic product (GDP) will contract 1.1 per cent in 2009. That marks a rapid deterioration in the economic environment from two months ago as the global financial crisis has deepened - a similar poll in late September forecast 4.6 per cent GDP growth in 2009.

"Singapore is particularly open to external trade - its export-to-GDP ratio is more than 180 per cent, compared with an Asia average of 60-70 per cent," said Eric Tsang, an analyst at Calyon in Hong Kong.

"So as US, European and Japanese consumers spend less that will hurt Singapore's exports and have a knock-on effect on the rest of the economy."

Economists see some rebound in 2010, forecasting 4.2 per cent growth, but that would be well below average annual growth of 6.8 per cent between 2003 and 2007.

Singapore slipped into recession - defined as two quarters of negative quarterly growth - in the third quarter.

Philip McNicholas, an economist at Ideal Global in Singapore, said the first quarter of next year would be especially tough - he forecasts GDP will drop at an annualised rate of 15 per cent, seasonally adjusted, as exports plunge.

"That will be mainly due to a collapse in US sentiment," McNicholas said. "The US plans a fiscal stimulus package early next year, but it's got to get that through Congress and to the people, so that may not be until the end of Q1 or the start of Q2."

The government pledged US$1.5 billion (US$1 = RM3.59) last month to help firms secure credit and said it was prepared to run a bigger budget deficit to boost the economy.

Manufacturing accounts for about a quarter of the economy and factory output fell 12.7 per cent in October from September, seasonally adjusted, and 12.6 per cent from a year earlier, led by sliding electronics and drugs output. - Reuters