Update: S'pore In Worst-Ever Recession After Q4 Slump

Source : The Business Times, January 21, 2009

Singapore's economy shrank more than expected in the fourth quarter, prompting the government to declare the nation was in its worst ever recession and fanning expectations that the central bank will let its currency weaken.

The government expects key non-oil domestic exports will shrink 9-11 per cent this year

The Singapore economy shrank in the fourth quarter at a seasonally adjusted, annualised pace of 16.9 per cent, deeper than advance estimates of a 12.5 per cent contraction, detailed government data showed on Wednesday.

The government said it now expected Singapore's economy to contract between two and five per cent this year, slashing its forecast further from an already downgraded outlook of a range of minus 2 per cent to plus 1 per cent published just three weeks ago.

'The Singapore economy is going through its sharpest, deepest and most protracted recession,' the Ministry of Trade and Industry's second permanent secretary Ravi Menon said at a media briefing.

Singapore's central bank said on Wednesday that its monetary policy stance of zero appreciation in the Singapore dollar announced last October was intact and it had no plans to review monetary policy ahead of a scheduled policy meeting in April.

But analysts said the gloomy economic forecasts and grim fourth quarter data increased the likelihood the central bank will loosen policy and let the Singapore dollar slide.

'I'm bearish for the Singapore dollar. It's worse than I expected,' said Irene Cheung, currency strategist at Royal Bank of Scotland in Singapore.

'I expect monetary policy to remain accommodative - they should have recentred the band earlier, but they might still do it - the sooner the better.'

Singapore manages monetary policy by adjusting the value of its currency relative to those of its main trading partners in an undisclosed band. The Singapore dollar stood at 1.5037 against the US dollar by 0050 GMT, compared with 1.51 before the data.

The government expects key non-oil domestic exports will shrink 9-11 per cent this year, while total trade, which includes entreport activities, may plunge 17-19 per cent.

From a year ago, fourth quarter gross domestic product, or the value of all goods and services produced in Singapore, fell 3.7 per cent following a drop of 0.2 per cent in the third quarter.

Singapore last reported three straight quarters of economic contraction in 2001 after the dotcom bubble burst in the United States, badly hurting the city-state's key electronics sector.

The economy grew 1.2 per cent for all of 2008, slowing sharply from 7.7 per cent expansion in 2007.

The government said manufacturing output in the fourth quarter shrank 10.7 per cent from a year earlier, while services contracted 0.1 per cent. -- REUTERS