Published October 22, 2008

EYE ON THE ECONOMY
Fewer bankrupts - but things may change soon

By OH BOON PING
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(SINGAPORE) There are fewer people going bankrupt in Singapore compared to a year ago, but there are indications that the situation could change in the coming months.

The number of individual bankruptcy petitions in the first nine months of this year fell 8 per cent year-on- year, according to the latest figures from the Insolvency and Public Trustee's Office under the Law Ministry.

MinLaw says there were 290 petitions for bankruptcies in September, thus bringing the total number of petitions to 2,314 for the first nine months of the year. This was down from the 2,514 cases seen a year ago.

Similarly, the number of bankruptcy orders made fell nearly 13 per cent to 1,825, from 2,087 orders in the first nine months of 2007.

However, the trend could be reversing as a month-on-month comparison indicates that bankruptcy figures have started rising.

September's individual bankruptcy petitions rose 21 per cent over August, which recorded 240 petitions, while the number of bankruptcy orders was 206, up slightly from 205 orders a month ago.

The latest bankruptcy figures come at a time when the economy has slipped into a technical recession amid a worsening credit crunch.

David Cohen, director of Asian economic forecasting at Action Economics, said: 'As a general rule, bankruptcy tends to be a lagging indicator of business activity.

'This makes intuitive sense, simply because of the time it takes to hire a lawyer to file the legal papers, as well as the fact that companies tend to have a small cushion that can sustain them for a little while when business starts to slow down.'

CIMB economist Song Seng Wun adds: 'The sub-prime mess was in the United States, not here. In Singapore, we have seen record job creation so far in the first half of 2008.'

However, both economists expect the trend to reverse as the situation worsens. Mr Song said: 'If the Singapore economy continues to struggle, we should see a reversal in trend from the second half of 2009 onwards, when more and more businesses are hit by the downturn in end demand.'

Meanwhile, the number of bankrupts here continues to climb, with a total of 26,677 undischarged bankrupts in Singapore as at the end of September.

The number of bankruptcy discharges for the nine months to September has also fallen, sliding 24 per cent to 922, from 1,209 in the same period last year.

In terms of corporate insolvencies, the number of companies wound up in the first nine months was 92 - up from 89 in the year-ago period.

However, the number of petitions for compulsory liquidation from January to September was 114 - unchanged from a year earlier.

Month-on-month, the number of petitions filed in September equalled those in August. There were 17 petitions in September, while nine firms were wound up, compared with 11 in the previous month.