But Singapore not expected to slide into recession
SINGAPORE’S economy probably shrank in the fourth quarter by an annualised 3.4 per cent, weaker than an advance government estimate and the first quarterly contraction since 2003, a Reuters poll showed.
The preliminary government estimate suggested the economy shrank an annualised 3.2 per cent in the final three months of 2007. Factory output at the end of the year was lower than expected, after a 4.3 per cent expansion in the third quarter.
Most economists do not expect Singapore to slide into recession – defined as two consecutive quarterly contractions in economic growth – although slower growth will probably prevent the central bank from tightening monetary policy to rein in inflation, which is at a 25-year high.
The slowdown, after four years of booming growth averaging 6.6 per cent, is due to a sharp fall in manufacturing activity as demand for electronics in the United States and Europe dropped in the fourth quarter.
Drug output was also weak at the end of 2007.
‘The fourth-quarter slowdown was due to a contraction in the biomedical sector, but we can expect a rebound in the first quarter,’ said David Cohen, an economist from Action Economics.
‘The biomedical sector would be the least vulnerable to weakness in global demand,’ he said.
Many Asian economies are expected to slow this year on the back of the struggling US economy, the region’s largest export market.
The International Monetary Fund cut its global 2008 growth projection to 4.1 per cent from 4.4 per cent in January because of continuing stress in global credit markets, and it warned that economic activity could slow even further.
Singapore’s economic growth in the fourth quarter is expected to have slowed to 6 per cent from a year earlier, down from 8.9 per cent in the third quarter but in line with the advance government estimate, the poll of 10 economists showed.
For 2007 as a whole, the economy probably grew 7.5 per cent, also in line with the government’s estimate but slightly lower than the 7.9 per cent in 2006.
‘A US recession is likely to deepen the manufacturing and export slump this year, causing GDP growth to slow to 5.6 per cent in 2008,’ said Kit Wei Zheng, a Citigroup economist.
Factory output, which generates a quarter of Singapore’s gross domestic product, unexpectedly fell a seasonally adjusted 4.7 per cent in December as annual drug production fell for the fourth straight month due to lower output of active drug ingredients.
The manufacturing sector grew just 0.5 per cent in the fourth quarter, an advance government estimate showed, braking from 10.3 per cent growth in the previous quarter.
Source: Reuters (Business Times 12 Feb 08)