Singapore’s economy may shrink more than previously forecast in 2009, the government said, citing the worsening global recession and foreshadowing a deepening slump throughout the region.
“The global economic crisis has worsened since November, with sharp declines in global demand, trade and investments,” the trade ministry said in a statement today. The economy may contract as much as 2 percent this year, twice as much as a Nov. 21 prediction, it said.
Singapore is speeding up its response to the global slowdown and will unveil more steps to help companies and minimize job cuts when it brings forward its 2009 budget announcement to this month, Prime Minister Lee Hsien Loong said Dec. 31. Policy makers around the world have cut lending rates and increased spending to sustain growth.
“It’s going to be a tough time across Asia,” said Alvin Liew, an economist at Standard Chartered Plc in Singapore. “We don’t see any bright spots in the Singapore economy, especially in the first half.”
Gross domestic product contracted an annualized 12.5 percent in the fourth quarter from the previous three months, after shrinking a revised 5.4 percent between July and September. The Southeast Asian economy has declined for three straight quarters, joining Japan, Hong Kong and New Zealand in recession.
The Singapore dollar fell 1.1 percent to 1.448 against the U.S. currency as of 10:12 a.m. local time today.
Singapore is among the first in the region to report fourth-quarter figures, providing an insight on how the credit crunch and the worldwide recession is affecting Asia’s economies.
The export-dependent nation has been battered by declining orders for electronic goods and pharmaceuticals from its biggest customers in the U.S. and Europe, as well as emerging nations. The World Bank last month predicted international trade will shrink in 2009 for the first time in more than 25 years.
The island’s manufacturing industry, which accounts for a quarter of the economy, contracted 9 percent last quarter from a year earlier, compared with a revised 11 percent drop in the previous three months, today’s report showed. The industry will be “weighed down” by falling demand in developed economies, the government said.
Singapore’s Chartered Semiconductor Manufacturing Ltd. and Taiwan Semiconductor Manufacturing Co., two of the world’s three largest custom-chipmakers, last month lowered their earnings projections amid delayed orders and a slump in demand.
Companies such as Royal Philips Electronics NV are cutting jobs in the city-state, and Prime Minister Lee this week said retrenchments may increase in the next few months.
“We must prepare for a difficult year ahead, especially the first half of 2009,” Lee said Dec. 31. “Our economy will probably contract further. Compared to the 1997 Asian financial crisis, this crisis is more difficult for us to overcome because it is global.”
Asian nations have announced spending packages to boost their flagging economies. China in November unveiled a 4 trillion-yuan ($586 billion) economic stimulus plan, while South Korea revealed a 14 trillion-won ($11 billion) package of extra spending and corporate tax breaks, adding to almost $20 billion in income-tax reductions announced in September.
In neighboring Malaysia, the government on Nov. 4 unveiled public projects valued at 7 billion ringgit ($2 billion) to spur growth. Singapore’s budget is scheduled for Jan. 22.
Singapore’s services industry slowed as the global credit crunch hurt financial companies, visitor arrivals declined and consumers reduced spending. Services climbed 1.1 percent in the fourth quarter from a year earlier, slowing from a 5.3 percent pace in the previous period. Financial services will “see a sharp slowdown,” the government said.
The construction industry grew 13.3 percent, easing from a revised rate of 18.6 percent in the previous quarter.
The $161 billion economy declined 2.6 percent last quarter from a year earlier, compared with a revised 0.3 percent drop between July and September. Growth was 1.5 percent in 2008, the slowest in seven years.
The government’s latest economic forecast for 2009 ranges from a contraction of 2 percent to expansion of 1 percent, compared with between a decline of 1 percent and growth of 2 percent estimated in November.
Singapore GDP contracts more than expected
Singapore’s preliminary gross domestic product (GDP) contracted 12.5% in the fourth quarter, against expectations for a 3.4% quarter-over-quarter contraction and the upwardly revised 5.4% decrease seen in the third quarter, originally reported as -6.3%.
GDP was down 2.6% year over year, against a 0.3% annual decline in the third quarter.
The report, released by Singapore’s Ministry of Trade and Industry Friday morning (Thursday night EST) said the sharpest annual declines were in the manufacturing sector, down 9.0% from one year ago. The construction sector was up 13.3% annually and the services and producing component was up 1.1%.