Fugly as fugly can be

By John Burton in Singapore
Published: January 22 2009 02:00
Financial Times

(Export numbers exploding across the entire region ... 'dogs and cats living together' with Chinese characteristics ... China reports 6.8% increase in GDP? Ain't no way, they be contracting. Singapore is the canary in the Chinese economic coal mine. - AM)

Singapore yesterday warned that its economy was likely to contract by up to 5 per cent this year, marking down its forecast of only three weeks ago.

The revision, which exceeds all but the most pessimistic economists' estimates, illustrates how the slowdown of global trade is affecting Asia's largely export-dependent economies.

"[Singapore's] economy is going through its sharpest, deepest and most protracted recession," said Ravi Menon, a trade ministry official, in advance of publication of the government's annual budget speech today. It is expected to include hefty stimulus measures, with state reserves to be tapped for support for the first time.

The government had published a 2009 growth forecast of 1 to -2 per cent. The revision, forecasting the export-dependent economy would shrink by 2-5 per cent, was in response to data that showed conditions deteriorated faster than expected in the fourth quarter of 2008. The government said deflation could occur, with consumer prices falling by as much as 1 per cent.

According to revised figures published yesterday, gross domestic product in the quarter contracted by 3.7 per cent from a year ago and 16.9 per cent at a seasonally adjusted annualised quarter-on-quarter basis; the worst performance on record since such data began to be published in 1976.

At the month's start, preliminary figures put the quarter-on-quarter contraction at 12.5 per cent.

Economists reckon the first quarter is likely to see deeper contraction. "Exports are plummeting" in such sectors as electronics, pharmaceuticals and chemicals, said Alaistair Chan at Moody's Economy.com. He said a "recovery will only occur in line with the rest of the world". The government said the city-state's total trade could decline by 17-19 per cent this year.