Singapore slips into recession.
Official 2008 growth estimate cut to 3%, but market economists already shaving 2009 forecasts
Singapore on Friday joined other Asian nations in easing monetary policy as the economy slipped into recession for the first time since 2002.
The economy contracted by 0.5 per cent in the third quarter from a year ago, based on preliminary data. The trade ministry cut its full-year growth forecast for 2008 to 3 per cent from a previous estimate of 4-5 per cent.
On an annualised, seasonally adjusted rate, the economy shrank by 6.3 per cent from the previous quarter, after contracting by 5.7 per cent in April-June period, which meant that Singapore is in a technical recession defined as two consecutive quarters of negative growth.
Singapore, due to its export-dependent economy, is seen as an important indicator of economic trends in the rest of Asia.
The trade ministry gave a bleak outlook for economic growth next year due to deteriorating global demand.
Nearly all of the city-state’s manufacturing industries, which make up a quarter of gross domestic product, are weakening. The ministry reported that the pharmaceutical industry is in ”negative growth” due to a fall in the value of products made locally.
The chemicals and marine-base precision engineering industries also are being affected by slower global demand. Although the ministry did not mention the mainstay electronics sector, analysts say it too is slowing significantly.
Construction, which has helped prop up the economy due to a building boom, grew by 7.8 per cent from a year ago compared to 18.3 per cent in the first half of 2008. The ministry said that emerging bottlenecks in the sector were curbing growth, including a shortage of contractors, a tight labour market for engineers and projects and equipment delays.
Services are expected to be affected by problems in the financial industry. Singapore has attracted fund management companies and hedge funds to boost its status as a regional financial centre, but analysts believe they will suffer cutbacks due to market turmoil.
In response to the gloomy forecast, the Monetary Authority of Singapore shifted to a neutral stance in its currency policy for the first time since 2003. The MAS conducts monetary policy through the foreign exchange rate rather than setting interest rates.
The value of the Singapore dollar is set by undisclosed trading band against a basket of key foreign currencies.
MAS said it was shifting it policy to zero per cent appreciation from a policy of modest and gradual appreciation adopted in April 2004. However, it will not change the slope or width of the trading band.
The monetary easing by the MAS was less than expected, but reflected concerns that inflation remained high. Consumer inflation is estimated to be 6-7 per cent this year, although it will slow to 2.5-3 per cent in 2009, MAS said.
The economy contracted by 0.5 per cent in the third quarter from a year ago, based on preliminary data. The trade ministry cut its full-year growth forecast for 2008 to 3 per cent from a previous estimate of 4-5 per cent.
On an annualised, seasonally adjusted rate, the economy shrank by 6.3 per cent from the previous quarter, after contracting by 5.7 per cent in April-June period, which meant that Singapore is in a technical recession defined as two consecutive quarters of negative growth.
Singapore, due to its export-dependent economy, is seen as an important indicator of economic trends in the rest of Asia.
The trade ministry gave a bleak outlook for economic growth next year due to deteriorating global demand.
Nearly all of the city-state’s manufacturing industries, which make up a quarter of gross domestic product, are weakening. The ministry reported that the pharmaceutical industry is in ”negative growth” due to a fall in the value of products made locally.
The chemicals and marine-base precision engineering industries also are being affected by slower global demand. Although the ministry did not mention the mainstay electronics sector, analysts say it too is slowing significantly.
Construction, which has helped prop up the economy due to a building boom, grew by 7.8 per cent from a year ago compared to 18.3 per cent in the first half of 2008. The ministry said that emerging bottlenecks in the sector were curbing growth, including a shortage of contractors, a tight labour market for engineers and projects and equipment delays.
Services are expected to be affected by problems in the financial industry. Singapore has attracted fund management companies and hedge funds to boost its status as a regional financial centre, but analysts believe they will suffer cutbacks due to market turmoil.
In response to the gloomy forecast, the Monetary Authority of Singapore shifted to a neutral stance in its currency policy for the first time since 2003. The MAS conducts monetary policy through the foreign exchange rate rather than setting interest rates.
The value of the Singapore dollar is set by undisclosed trading band against a basket of key foreign currencies.
MAS said it was shifting it policy to zero per cent appreciation from a policy of modest and gradual appreciation adopted in April 2004. However, it will not change the slope or width of the trading band.
The monetary easing by the MAS was less than expected, but reflected concerns that inflation remained high. Consumer inflation is estimated to be 6-7 per cent this year, although it will slow to 2.5-3 per cent in 2009, MAS said.
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If Singapore fall into technical recession the Singapore dollar would be depreciated for reflex the weakness on the singapore economy. Inflation maybe come in, as the Singapore dollar is depreciated. believe that this should be short term problem and the problem will be over come, Singapore fundamental is still strong.
