Singapore GDP probably shrank a fourth quarter on export slump

Shamim Adam

Singapore’s economy probably shrank for a fourth straight quarter as manufacturing and exports collapsed, adding pressure on the central bank to allow the currency to weaken to revive growth.

Gross domestic product fell an annualized 9.6 percent last quarter from the previous three months, after shrinking 16.4 percent between October and December, according to the median estimate of 13 economists surveyed. The trade ministry will release the data at 8 a.m. tomorrow, and the Monetary Authority of Singapore will give its semi-annual review of the currency.

The worst global economic slump since World War II has pushed trade-dependent Singapore into the deepest recession in its history. Government efforts to prevent job losses by handing out cash to companies haven’t stopped manufacturers such as Creative Technology Ltd. from firing workers, and economists expect the island to loosen monetary policy this week.

“Singapore’s economy is still in contraction mode and not out of the woods yet,” said Irvin Seah, an economist at DBS Bank Ltd. in Singapore. “With growth likely to be below potential until next year, the central bank will adjust its currency policy to be consistent with the economic conditions.”

The Monetary Authority of Singapore, which uses the currency to manage inflation, stopped favoring gains in the local dollar in October. The central bank may devalue the Singapore dollar and allow it to drop 4 percent against its U.S. counterpart by June 30 to aid exporters, economists surveyed by Bloomberg News last month said.

Currency policy

Policy makers will shift the mid-point of the Singapore dollar trading band, in which the exchange rate is allowed to fluctuate against a basket of currencies, 15 of 17 economists surveyed said. The central bank will also maintain a neutral stance, in which it seeks neither gains nor losses, after the one-off depreciation, the survey showed.

Singapore in January cut corporate taxes for the second time in three years and unveiled S$20.5 billion ($13.5 billion) in tax rebates and cash handouts to help businesses and workers survive the slowdown.

Overseas shipments by Singapore, the world’s busiest container port, have dropped for 10 consecutive months. The country’s industrial production has fallen into the longest slump in eight years.

Tourist arrivals have declined, private home prices plunged by the most in at least 16 years last quarter and consumers are rolling over an unprecedented amount of credit-card debt.

Cutting forecast

The government will have to cut its current estimate that the economy will contract in a range of 2 percent to 5 percent this year, the Straits Times cited Prime Minister Lee Hsien Loong as saying last week. Still, the decline is likely to be less than 10 percent, he said.

Singapore’s $161 billion economy declined 9.1 percent in the three months ended March from a year earlier, compared with a 4.2 percent drop in the fourth quarter of 2008, economists predicted.

The following table gives forecasts for the percentage change in gross domestic product from a year earlier and the annualized, seasonally adjusted change from the previous quarter.

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