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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 percent 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 percent GDP growth in 2009.
“Singapore is particularly open to external trade — its export-to-GDP ratio is more than 180 percent, compared with an Asia average of 60-70 percent,” said Eric Tsang, an analyst at Calyon in Hong Kong.
“So as U.S., 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 percent growth, but that would be well below average annual growth of 6.8 percent 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 percent, seasonally adjusted, as exports plunge.
“That will be mainly due to a collapse in U.S. sentiment,” McNicholas said. “The U.S. 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 $1.5 billion 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 percent in October from September, seasonally adjusted, and 12.6 percent from a year earlier, led by sliding electronics and drugs output.
Manufacturing is expected to be harder hit next year as the downturn in advanced economies accelerates and job losses in the sector will rise as a result, analysts say.
Rising unemployment will dent consumer spending, which is not being helped by a decline in tourism since August.
As the weak economy will encourage the authorities to keep monetary policy loose, the Singapore dollar is likely to remain sluggish, the poll forecast.