S’pore is in recession <!––>
|By Fiona Chan|
MTI has also revised its full-year growth forecast for the second time this year, lowering it to ‘around 3 per cent’ from 4 to 5 per cent previously. This would make it the weakest pace in seven years.
Recognising growth concerns, the Monetary Authority of Singapore also changed its policy stance to zero appreciation of the Singapore dollar, reversing the gradual appreciation policy it has adopted since 2003.
On a quarterly basis, third-quarter GDP contracted 6.3 per cent from the second quarter, on top of a 5.7 per cent decline in the previous three months. A technical recession is generally defined as two consecutive quarters of decline.
Manufacturing led the slowdown again this time around, weighed down by a poor performance in the biomedical sciences segment. It was also hit by weakened global demand for exports as the United States-triggered financial crisis spreads around the world.
The sector shrank by 11.5 per cent in the third quarter, after declining 4.9 per cent in the previous quarter.
Growth in construction and services also slowed. Construction, in particular, saw its pace of expansion halved to single-digit growth, as projects were delayed by the construction squeeze, said MTI.
Services, touted as a key driver of growth this year, is likely to take a hit as well as financial services falters in the wake of the global credit crunch.
Most economists expect the economy to grow even more slowly next year, with the chance of a technical recession turning into a ‘real’ one.
‘With external conditions deteriorating and the lack of domestic demand support, we expect Singapore to register no growth next year… with a muted recovery, if at all, expected only in the second half of next year at the earliest,’ said Morgan Stanley economists in a report.
Inflation, which reached a 26-year high earlier this year, has peaked, said MAS. Consumer prices will rise between 6 per cent and 7 per cent this year, and gains will ease to between 2.5 per cent and 3.5 per cent in 2009, it predicted.
‘Against the backdrop of a weakening external economic environment and continuing stresses in global financial markets, the growth of the Singapore economy is expected to remain below potential in the period ahead,’ said MAS.
‘Inflation is expected to trend down in 2009 as the global and domestic economies slow.’