Singapore’s recession deepens

Government warns economy may shrink further by 2% this year

Singapore’s recession deepened in the fourth quarter as the global financial crisis took its toll on manufacturers and the services sector, and the government warned the economy may shrink by as much as 2% this year.

The economy contracted at a seasonally adjusted, annualised pace of 12.5% during the October-December quarter, following a revised 5.4% decline in July-September, data showed yesterday.

It was the third consecutive quarter of decline in gross domestic product and was worse than the most pessimistic forecast of nine economists polled by Reuters which was for a decline of 8.6%.

The government now expects Singapore’s GDP to come in between a decline of 2% and growth of 1% in 2009, lower than the previous forecast of 1% to 2% made in November.

But some economists are predicting an even deeper recession.

“If we are correct, 2009 will mark the most severe recession in Singapore’s history, surpassing the Asian Financial Crisis (when GDP contracted 1.4%) and the 2001 tech recession,” said Citigroup economist Kit Wei Zheng, who predicts the economy would shrink 2.8% in 2009.

“This sets the stage for more aggressive fiscal stimulus on the Jan 22 budget, and further monetary easing by MAS (the Monetary Authority of Singapore) in April, or even before.”

Shipping vessels at the PSA International's Pasir Gudang terminal in Singapore. - Reuters

The economy grew 1.5% for all of 2008, compared with 7.7% in 2007.

From a year ago, fourth quarter GDP fell 2.6% following a drop of 0.3% in the third quarter, advance estimates from the Ministry of Trade and Industry showed.

Meanwhile, Singapore private home prices fell for a second consecutive quarter in October-December according to advance government estimates, hurt by a drop in investor sentiment amid the global economic downturn.

The Urban Redevelopment Authority said yesterday its private residential property index declined 5.7% in the fourth quarter from the previous three months, worse than the drop of 2.4 % in July-September. — Reuters