Business | Economy
Falling demand from US and Europe hurts Singapore
Singapore's economy contracted in the third quarter as falling consumer demand from the US and Europe hurt manufacturing exports and pushed the city-state to the brink of recession, the Trade and Industry Ministry said on Friday.
- Agencies
- Published: 23:53 October 10, 2008
Singapore: Singapore's economy contracted in the third quarter as falling consumer demand from the US and Europe hurt manufacturing exports and pushed the city-state to the brink of recession, the Trade and Industry Ministry said on Friday.
Gross domestic product (GDP) fell 0.5 per cent in the July-September period from the same quarter a year ago, the ministry said. The government cut its 2008 economic growth forecast to three per cent from between four and five per cent, the ministry said.
"There's no question that growth will continue to slow down,' said Yuwa Hedrick-Wong, economic adviser in Asia for MasterCard Worldwide. "2009 is likely to be a very difficult year."
Singapore's economy, heavily dependent on exports, is among the first in Asia to bear the brunt of an economic slowdown in the world's developed countries. The Southeast Asian country's economy grew 2.3 per cent in the second quarter and seven per cent in the first.
Manufacturing, led by pharmaceuticals, shrank 11.5 per cent in the third quarter, while construction grew 7.8 per cent and services rose 6.1 per cent. Compared to the previous quarter, the economy contracted a seasonally adjusted 6.3 per cent in the third quarter and fell 5.7 per cent in the second quarter, the ministry said.
Prime Minister Lee Hsien Loong said Asian economies face slowing growth for at least the next year. "The problems facing financial institutions in the US and Europe are complex and grave," Lee said in a speech on Friday. "Asian countries cannot avoid the impact of weakening US, European and Japanese economies."
Estimates
The third quarter GDP estimates are based largely on data from July and August and may be revised later, the ministry said. A recession is usually defined as two consecutive quarters of economic contraction compared to the same period a year earlier.
The central bank, known as the Monetary Authority of Singapore, said in a statement yesterday it shifted its foreign exchange policy to a "zero per cent appreciation" of the Singapore dollar from a "modest and gradual appreciation" in a bid to boost the competitiveness of the country's exports.
The government said last month that non-oil exports plummeted 14 per cent in August after a 5.8 per cent fall in July.
The central bank, which uses the currency as its main monetary policy tool, allows the Singapore dollar to trade within a range against a group of foreign currencies.
"A strong Singapore dollar has been quite detrimental to growth, especially manufacturing," Hedrick-Wong said.
"It's much better to take a risk with inflation and deal with growth by making the Singapore dollar weaker and support exports."
The government left unchanged its 2008 inflation forecast at between six per cent and seven per cent, and expects 2009 inflation between 2.5 per cent and 3.5 per cent.
Share this article
Popular in Business
-
XPRESS
Way to go this DSF
A fun-filled route to guide you to all the happening dos in town
Business Editor's choice
-
The brains behind campaigns
Chief executives likely to be guided more by bankers and consultants
-
Britain's green departure tax slammed
UK government pulls out of UN body ahead of Copenhagen summit
-
Emirates could buy more aircraft
Airline plans new routes, expects demand to increase
