GDP Forecast Cut By 3 Pts

Source : The Straits Times, Jan 21, 2009

Economy may shrink up to 5 per cent in 2009.

SINGAPORE, which is facing its 'sharpest, deepest and most protracted recession' from the fast-deteriorating global economy, further revised its GDP growth forecast on Wednesday to between -5 per cent and -2 per cent this year.

Singapore will unveil this year's budget plan tomorrow, as it attempts to speed up aid to companies hurt by the global recession and minimise job cuts. -- PHOTO: URA

This is lower than the -2 per cent to 1 per cent growth range it had forecast on Jan 2. The economy grew 1.2 per cent last year, less than earlier estimated.

A 5-per-cent slump this year would be the worst-ever on record.

The Ministry of Trade and Industry (MTI) said the downward revision was mainly due to worst-than-expected decline of the world economy and its 'much stronger' spillover into the region's economies.

Mr Ravi Menon, MTI's second permanent secretary said: 'What took us by surprise ... is the depth of the deterioration in global economic activity and, second the spillover it has on the region and Singapore.

'Typically you do not see this kind of collapse in trade so early in the cycle.'

Preliminary data showed that the Singapore economy grew 1.2 per cent last year compared with 7.7 per cent in 2007.

GDP shrank by 3.7 per cent in the fourth quarter - worse than the 2.6-per cent drop in the advance estimate.

It also plunged about 16.9 per cent last quarter from the previous three months - more steep than the 12.5 per cent retreat in the flash estimate and the largest quarterly decline on record.

The manufacturing sector is estimated to have shrank by 4.1 per cent, down from an expansion of 5.8 per cent in 2007.

Several clusters - electronics, precision engineering, and chemicals - were affected by the rapid decline in demand in Singapore's key export markets, especially in the final quarter of 2008.

Total trade rose 9.6 per cent to $928 billion last year, but is tipped to slump by between 17 and 19 per cent this year - down from the previous forecast of a 6-8 per cent drop.

Non-oil exports are expected to dip between 9-11 per cent, compared to the previous forecast of between -1 and 1 per cent.