Singapore GDP down 2.6% in fourth quarter, the sharpest fall in seven years
By ANNA TEO
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THE Year of the Ox may be around the corner, but the latest gross domestic product figures have brought out the market bears in force, with the official growth forecast for 2009 now skewed towards the red.
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Economists now reckon the Singapore economy could be headed for its worst quarterly contraction on record in the current Q1, and see its most severe recession this year, going by how sharply both the manufacturing and services sectors have been hit by the global downturn. Following the prime minister's announcement in his New Year message of worse-than-expected 2008 GDP growth of 1.5 per cent, the Ministry of Trade and Industry yesterday said that it now expects Singapore's 2009 growth to range between a 2 per cent contraction and one per cent growth.
This is down from its November 2008 forecast for the year, also a three-point range, but tilted towards growth: minus one per cent to positive 2 per cent. The global economic crisis has worsened since November, MTI said, noting that world trade volumes are expected to contract for the first time in 26 years this year. And the Singapore economy just suffered its sharpest decline in seven years - GDP fell 2.6 per cent in Q4 from a year ago, or more than what the most pessimistic forecasts expected. According to MTI's advance estimates, based largely on only October and November data, the manufacturing sector contracted for a third straight quarter in Q4 - by 9 per cent - and by 3.7 per cent year-round.
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Growth in the services and construction sectors also slowed sharply in Q4. Says market analysis firm Forecast in a report on Singapore: 'The crux of the matter is that exports will probably continue to languish for the better part of 2009 - lagging any initial recovery that we can expect in the industrialised nations - and necessarily the manufacturing sector will share the pain.'
Most economists have largely earlier already pencilled in a full-year contraction in their forecasts of Singapore's 2009 growth, but the latest GDP figures did prompt at least one forecaster to cut - no, slash - his estimates yesterday.
Citigroup economist Kit Wei Zheng lopped off 1.6 points from his forecast for a 2.8 per cent contraction - which would spell the biggest full-year contraction since 1964, surpassing 2001's 2.4 per cent slump.
Citing 'forward looking indicators', he now thinks the first-half contraction could be deeper than expected earlier, with the Q1 decline possibly hitting 8 per cent. The biggest quarterly contractions to date in more 'recent' times were in the second half of 2001, when GDP fell more than 6 per cent in both Q3 and Q4. Both manufacturing output and non-oil domestic exports will likely shrink in double digits in Q1, going by leading indicators from the OECD (Organisation for Economic Co-operation and Development) economies and the US purchasing managers' index, says Mr Kit.
Citigroup's forecasts may seem about the most bearish in town, but they at least leave room for a Q4 rebound to positive territory. Standard Chartered Bank economist Alvin Liew, who had pared his 2009 forecast for Singapore to a 2.5 per cent contraction in mid-December, is looking at four negative quarters, year-on-year, with the economy probably at its weakest point in Q2. 'It's difficult to see much upside for Singapore at this point,' he says.
DBS Bank economist Irvin Seah is staying, for now, with his forecast of a 0.6 per cent contraction in 2009 - around the midpoint of the official forecast, and which is also among the more 'optimistic' figures at this stage.
But the risks are on the downside, he says. Depending on how the various stimulus policy responses worldwide pan out, Singapore may get some positive spinoffs, though that will come through only later in the year, he adds.
As for any boosts from the upcoming Budget, economists expect the measures to at most provide some buffer for beleaguered businesses and stem the tide of job losses.
One 'upside' from the poor economic outlook is that inflationary pressures should all but disappear this year, though Citigroup's Mr Kit thinks 'a slide into temporary deflation cannot be ruled out'.
In its statement yesterday, the Ministry of Trade and Industry said the sharp declines in global demand, trade and investments will hit the Singapore economy across the board.
While the manufacturing, wholesale trade, transport and retail sectors get direct hits, the financial services will continue to be dragged down by weak markets and credit growth. The slowdown will in turn spread domestically to the property and business services.
Details of Singapore's Q4 2008 and full-year economic performance will be unveiled next month.
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