Business | Economy
Singapore economy shrinks in second quarter
Singapore's economy contracted in the second quarter and the government forecasts exports to fall this year for the first time since 2001, a sign that sagging growth is becoming a bigger worry for Asia than inflation.
- Reuters
- Published: 23:22 August 11, 2008
Singapore: Singapore's economy contracted in the second quarter and the government forecasts exports to fall this year for the first time since 2001, a sign that sagging growth is becoming a bigger worry for Asia than inflation.
The government yesterday forecast non-oil domestic exports would fall two to four per cent in 2008, against an earlier estimate of two to four per cent growth, and predicted the economy would grow at the lower end of a weaker four to five per cent forecast.
In the second quarter, the economy contracted at a annualised rate of six per cent after seasonal adjustments, its worst performance in five years and in line with market expectations. Year-on-year the economy grew 2.1 per cent.
Singapore's heavy dependence on trade makes the $160 billion economy a good gauge of how the global slowdown is affecting Asia. Non-oil domestic exports to the US fell 21 per cent in the second quarter, and shipments to the European Union fell 12 per cent.
The Singapore dollar, the central bank's main policy tool, slumped to a near six-month low around S$1.41 to the US dollar. "The balance of risk is shifting away from inflation toward growth as seen from the correction of the Singapore dollar last week," said Kit Wei Zheng, an economist at Citigroup.
Like many Asian countries, Singapore has been grappling with inflation even as economic growth slows. But officials suggested yesterday that inflation may have peaked and said - while not expecting a technical recession - that there will be no quick turn-around in global growth.
"The macroeconomic dynamics will remain fluid over the next 12 to 18 months. It is too early to tell what 2009 will bring," Ravi Menon, a permanent secretary at the trade ministry, told reporters. "Current indications are that global economic growth will not see a quick turn-around."
Construction grew 17.4 per cent year-on-year and the financial sector grew 10.2 per cent in the second quarter, but manufacturing shrank 5.2 per cent.
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