Singapore said Monday economic growth slowed to an annual rate of 2.1 per cent in the second quarter and forecast a decline in key exports, with experts saying the US slowdown had begun to hit Asia.
The 2008 economic growth target had also been cut to four to five per cent from four to six per cent previously, the city-state's Ministry of Trade and Industry (MTI) said.
The revised growth target was "consistent with the moderation in economic growth seen" over the three months to June in Southeast Asia's most advanced economy, it said. The economy grew 4.5 per cent over the first half and the outlook for the rest of 2008 was not expected to improve much as the world's major economies were slowing, affecting Singaporean and Asian exports, the ministry added.
Projecting a similar level of expansion in the second half, it said "weaker demand in the major economies, coupled with the need to contain inflationary pressures, will dampen growth in the fast growing Asian economies."
The second-quarter performance was sharply down from the 6.9 per cent rise recorded in the first quarter. On an annualised, quarter-on-quarter basis, the economy contracted 6.0 per cent in the second quarter.
"The economy is slowing as the US economy appears to be starting to affect countries in Asia and elsewhere," said Alaistair Chan, a Sydney-based economist at Moody's Economy.com.
"Weak export demand is the main reason the government cut its GDP (gross domestic product) growth forecast for this year," Chan said, but added Singapore's construction and service sectors were still going strong.
Singapore's United Overseas Bank said the city-state would continue to feel the pinch from slowing exports, especially of electronics, and lowered its 2008 growth target to 4.2 per cent from 4.7 per cent previously.
"As the Eurozone and Japan join in a US-led slowdown, the small, open and export-driven Singapore economy would be unable to decouple meaningfully from weaker global demand," the bank said in a report.
Singapore also said Monday that its key exports could decline up to four per cent this year as a global economic slowdown takes its toll.
Trade promotion agency International Enterprise Singapore had previously forecast a two to four per cent rise.
Prime Minister Lee Hsien Loong first announced a lower 2008 economic growth target on Friday during his National Day message. The government's lower predictions represent a sharp slowdown from last year's 7.7 per cent expansion.
The weak second-quarter economic performance was due to a contraction in the biomedical sector and sluggish growth in the electronics industry, both lynchpins of Singapore's trade-led economy, the MTI said.
The manufacturing sector shrank an annual 5.2 per cent over the three months to June, after growing 12.7 per cent in the previous quarter.
Construction grew 17.4 per cent, faster than the 16.9 per cent growth in the first quarter, while service sector industries expanded 7.0 per cent compared with 7.7 per cent in the March quarter.
The US economy, a key buyer of Asian good and services, has slowed after a financial crisis and tumble in house prices. - AFP/ir
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