Singapore economy plummets 20 percent in first quarter

The Jakarta Post, The Associated Press, Singapore | Tue, 04/14/2009 1:18 PM

Singapore's economy plummeted nearly 20 percent in the first quarter, its biggest contraction ever, flagging a miserable start to the year for other export-dependent Asian nations grappling with the worst global slump in decades.

Gross domestic product in this wealthy Southeast Asian city-state plunged an annualized, seasonally adjusted 19.7 percent in the first quarter from the previous quarter and fell 11.5 percent from a year earlier, both record drops, the Trade and Industry Ministry said Tuesday.

The government now expects the economy to shrink between 6 percent and 9 percent this year from a previous forecast of a drop between 2 percent and 5 percent, the ministry said in a statement. The 2009 growth forecast has now been cut three times.

Singapore announced in January a $14 billion stimulus package, and the government may boost spending again in June to help bolster the economy, said Tai Hui, head of Southeast Asia research for Standard Chartered in Singapore.

"We believe we are facing a Great Recession, but we are not going into a Great Depression," Hui said. "We still expect to see some signs of stabilization at the end of 2009, although admittedly mild."

The island's economy has already contracted quarter-on-quarter over four consecutive quarters.

Singapore was the first country in Asia to report GDP figures for the January-March period, and its dismal showing suggests the region's most export-dependent economies - such as Japan, South Korea, Taiwan and Hong Kong - may face deeper and longer recessions than previously estimated.

China announces preliminary first quarter GDP results on Thursday.

The city-state's central bank, known as the Monetary Authority of Singapore, said it lowered the center of its currency trading band, which was effectively a small, one-time devaluation of the Singapore dollar. But it said there was no reason for "any undue weakening" of the Singapore dollar.

Standard Chartered's Hui estimated the devaluation at 1.5 percent.

The central bank's inflation forecast for prices to fall as much as 1 percent this year was unchanged.

Non-oil exports, which accounted for about 60 percent of GDP last year, fell 26 percent in the first quarter from a year earlier.

The ministry said it expected sales abroad to contract between 10 percent and 13 percent this year from a previous forecast of a drop of between 9 percent and 11 percent.

One bright spot was exports rose a seasonally adjusted 11 percent in March from the previous month, the ministry's trade promotion agency, International Enterprise Singapore, said in a statement. March exports fell 17 percent from a year earlier.

Manufacturing fell 29 percent in the first quarter from a year earlier while services fell 5.9 percent. Construction rose 26 percent.

"Manufacturing was dragged down by the biggest, most synchronized collapse in world trade since the 1930s, which in turn has had some knock on consequences for services," said Robert Prior-Wandesforde, senior Asia economist for HSBC in Singapore.

Imports fell 28 percent last month from a year earlier and dropped a seasonally adjusted 4.7 percent from the previous month, the ministry said.

Singapore's first quarter GDP results are preliminary and based largely on economic activity in January and February. The government forecast economic growth of as much as 2 percent for this year in an initial forecast in November.