S'pore To Post Negative GDP Growth In 2009: Merrill

Source : The Business Times, November 21, 2008

Singapore is now expected to post a negative gross domestic product (GDP) growth in 2009 of minus 0.5 per cent year-on-year, Merrill Lynch projected on Friday shortly after the government release figures confirming a recession in the city-state.

Merrill said its latest forecast was revised from the previous projection of a meager 1 per cent year-on-year rise.

'Looking ahead, Singapore will likely endure another 2-3 quarters of negative growth,' Silvia Liu, Merrill's Hong Kong based economist said in her report.

'History shows that the downward adjustment in growth typically lasts 4-5 quarters during a recession. In other words, the growth trough will unlikely be in sight until sometime in H109,' she added.

Ms Liu said the Singapore export sector, which Merrill had estimate to contribute 60-70 per cent of GDP in value added terms, is feeling the full brunt of the external shock.

Exports of goods and services slowed to 3.7 per cent year-on-year (down from 6.9 per cent y-o-y), with net exports subtracting over 11 percentage points from headline growth.

While the slowdown remains heavily concentrated in the trade related sectors (manufacturing declined 11.4 per cent y-o-y), there are signs that the shocks are increasingly filtered down to the domestic economy.

Ms Liu added that in particular, fixed investment slowed to 13.1 per cent y-o-y in Q308, down from 24.1 per cent y-o-y in Q208, in part driven by the downturn in the residential property market. Private consumption, rising 4.7 per cent y-o-y (versus 5.1 per cent y-o-y in Q208), is nevertheless more resilient.

Early Friday, the Singapore government said the economy shrank at an annualised, seasonally adjusted rate of 6.8 per cent in the third quarter, final government data showed on Friday, confirming the export-dependent country's first recession since 2002.