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Singapore's economy to shrink 5%

Singapore said its economy may shrink an unprecedented five per cent this year, fanning speculation the government will announce record spending in its budget today to help companies hurt by the global recession.

  • Bloomberg
  • Published: 23:19 January 21, 2009
  • Gulf News

Singapore: Singapore said its economy may shrink an unprecedented five per cent this year, fanning speculation the government will announce record spending in its budget today to help companies hurt by the global recession.

Finance Minister Tharman Shanmugaratnam may outlay as much as S$20 billion ($13.3 billion, Dh48.88 billion), or eight per cent of gross domestic product, to help households and businesses survive the slump, Macquarie Capital Securities predicts. The government may also tap into its reserves for the first time to fund the expenditure.

Singapore is going through its sharpest recession and may experience the deepest deflation since 1986 this year, the government said. Falling demand has forced companies such as DBS Group Holdings and Stats Chippac to fire workers, and Credit Suisse Group predicts as many as 300,000 jobs may be lost by the end of 2010.

"All the government can do is to ensure that citizens and businesses cope with the recession because it's not possible to counteract the drop in external demand," said Chow Penn Nee, an economist at United Overseas Bank in Singapore. "The situation may start to improve only in the fourth quarter."

The Singapore dollar gained 0.3 per cent versus its US counterpart to S$1.5028 as at 3.18pm local time, after the central bank said there's no reason for the currency to continue weakening, with wage and fiscal measures "more appropriate" to help companies cut costs.

"Our monetary policy stance remains intact," Ong Chong Tee, deputy managing director of the Monetary Authority of Singapore, said yesterday. "This current slowdown reflects the sharp decline in the external environment and not an erosion of competitiveness and therefore there is no reason for any persistent weakening in the Singapore dollar."

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