Singapore economy may post biggest decline on record

Shamim Adam & Chen Shiyin

Singapore’s economy may shrink a record 5 percent this year as exports slump, increasing pressure on the government to take steps to help businesses and consumers.

Singapore is going through its sharpest and deepest recession, which may be the longest in the country’s history, said Ravi Menon, an official at the trade ministry. Gross domestic product may shrink 2 percent to 5 percent this year, the ministry said today.

The Singapore dollar fell after the government cut its economic forecast for the second time in less than three weeks. Finance Minister Tharman Shanmugaratnam will unveil this year’s budget plan tomorrow to speed up aid to companies hurt by the global recession and minimize job cuts by manufacturers such as Creative Technology Ltd.

“All the government can do is to ensure that citizens and businesses cope with the recession because it’s not possible to counteract the drop in external demand,” said Chow Penn Nee, an economist at United Overseas Bank Ltd. in Singapore. “The situation may start to improve only in the fourth quarter.”

The Singapore dollar declined as much as 0.3 percent versus the U.S. currency to S$1.5120, according to data compiled by Bloomberg. That was the weakest since Dec. 8. It traded at S$1.5041 as at 9:39 a.m. local time.

The Southeast Asian economy has contracted for three straight quarters, sliding into recession along with Japan, Hong Kong and New Zealand. The likelihood of a sharp rebound in growth “appears low,” Menon told reporters in Singapore today.

Job losses

The economy grew 1.2 percent last year, less than earlier estimated. A decline of 5 percent this year would be the worst since the nation gained independence in 1965, according to Bloomberg data.

“2009 will definitely be a tough year for Singapore and most of export-oriented Asia,” said Manpreet Gill, a strategist at Barclays Wealth in Singapore. “In Asia, I won’t expect a sharp recovery. It will be a bit more drawn out.”

More than 10,000 people were retrenched last year and a worsening economy may result in job losses tripling in 2009, reaching numbers not seen since the Asian financial crisis a decade ago, the government said this week.

The government said today the nation may experience deflation this year, with consumer prices falling as much as 1 percent or staying unchanged.

Gross domestic product declined an annualized 16.9 percent last quarter from the previous three months, after shrinking a revised 5.1 percent between July and September, the trade ministry said. The contraction in the fourth quarter was worse than a Jan. 2 estimate of 12.5 percent.


“The economic downturn has spread to all the key sectors of the economy,” Trade Minister Lim Hng Kiang said Jan. 19. “Our manufacturing sector is likely to continue facing a slowdown this year.”

Manufacturing, which accounts for a quarter of the economy, fell a revised 10.7 percent in the three months ended December from a year earlier, and shrank 4.1 percent in 2008, the trade ministry said.

The export-dependent nation has been battered by declining orders for electronics goods and pharmaceuticals from its biggest customers in the U.S. and Europe, as well as emerging markets. Creative Technology, the Singaporean maker of accessories for Apple Inc.’s iPod, said Dec. 31 it eliminated 2,700 jobs or almost half its workforce last fiscal year after demand for its own music players tumbled.

Weak sentiment

Overseas shipments may drop as much as 11 percent in 2009, the government said today, after a 7.9 percent decline last year that was the worst performance since 2001.

Growth in the services and construction industries slowed. Services dropped 0.1 percent in the fourth quarter from a year earlier, and grew 5 percent last year. Construction gained a revised 14.1 percent, and rose 17.9 percent in 2008.

“Weaker consumer sentiments among Singaporeans have affected the retail sector and the property market,” Trade Minister Lim said. “Retailers and restaurants are seeing slower business as consumers are reining in discretionary spending.”

Singapore’s visitor arrivals and tourism receipts missed government targets last year and the nation expects a “challenging year” for the industry in 2009 as the global recession curtails consumer spending and holiday plans.

Companies such as lender DBS Group Holdings Ltd. and manufacturer Stats Chippac Ltd. are firing workers as demand for goods and services ebb. About 4,800 people were retrenched last quarter, acting Minister for Manpower Gan Kim Yong said Jan. 19.

Government spending

Credit Suisse Group predicts up to 300,000 positions may be shed by end-2010, compared with the government’s estimate of as many as 30,000 jobs lost this year.

The government may announce as much as S$20 billion ($13 billion) in additional spending tomorrow when it unveils its budget, said Selena Ling, head of treasury research at Oversea- Chinese Banking Corp. in Singapore.

Businesses will get help with rental and wage bills, Prime Minister Lee Hsien Loong said Dec. 31. The government in November said it will extend more loans to local companies and spend S$600 million over the next two years on worker training.

Measures to help citizens survive the recession may include as much as S$7.5 billion of cash handouts, tax and utility rebates, said Ling at Oversea-Chinese Banking Corp.

“The budget would likely take an aggressive and multi- pronged approach to reduce costs, assist businesses and Singaporeans, and pump-prime the economy while not forgetting medium-term competitiveness,” Ling said. It will “only partially mitigate the economic downturn.”

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