S'pore Able To Dodge Recession In '08: Analysts

Source : The Business Times, January 19, 2008

SINGAPORE'S export-driven economy, which shrank in the fourth quarter, will feel the impact of a slowdown in the US but will just avoid recession, analysts said yesterday.

Weak export figures on Thursday suggested the government's Jan 2 advance estimate, showing the economy shrank in the fourth quarter at an annualised and seasonally adjusted rate of 3.2 per cent, would be downgraded when final figures are reported.

Since the advance estimate, US economic data has grown increasingly gloomy and on Thursday, the Singapore government reported that exports, the main growth driver, fell in December for the fourth consecutive month.

But economists said buoyant construction and services sectors and a pick up in drugs production should offset the impact from a weakening US economy in the first quarter, preventing a recession.

The standard definition for recession is two consecutive quarters of economic contraction.

Still, it will be a close call, they said. Out of eight economists surveyed, five said Singapore would avoid recession. Three said there was a risk of recession.

'The likelihood of a recession is in the low probability but high risk category,' said Song Seng Wun, an economist at CIMB-GK Research said. 'It all boils down to how pharmaceuticals will do.'

Exports of drugs fell in November and December, suggesting a rebound early this year, economists said. The industry produces about 10 per cent of Singapore's non-oil exports, the main measure of the country's trade performance.

But drug production is volatile because firms often switch products and shut down factories for periods to prepare for production of another drug. This can have an unpredictable impact on trade and growth.

The economy's contraction in Q4 2007 was the first since since 2003. But the economy hasn't suffered a recession since 2001 and 2002, when the US was also in recession.

Most economists expect the Singapore economy to grow between 4 and 6 per cent this year. -- Reuters