Swine flu seen as threat to Singapore’s economy
The worst may be over for Singapore's economy after its deepest ever contraction in the first quarter, but the outbreak of swine flu clouds the outlook for this year, Reuters quoted the Monetary Authority of Singapore as saying Thursday.
The economy, which preliminary data showed tumbling at an annualised seasonally-adjusted pace of 19.7 percent in the first quarter, is poised for a slow recovery, in contrast to rebounds that followed previous downturns, the de factor central bank warned.
"The most intense phase of the contraction in overall GDP has probably occurred in Q4 2008 and Q1 this year," said the Monetary Authority of Singapore in its twice-yearly Macroeconomic Review.
"However, the adverse external factors impacting the Singapore economy are likely to persist while the recent outbreak of swine influenza has added a new dimension to the risks for GDP prospects in the months ahead," the central bank said.
Southeast Asia's most open economy and the first to enter a recession in 2008, has been hit hard by the global downturn and the government expects it to shrink six-nine percent this year.
Anxiety over a global flu crisis and the health of US banks have dampened hopes that the financial system was stabilising, with the spectre of a pandemic starting to hit the travel industry.
"Weak global industry demand and structural strains could further weigh down the domestic manufacturing sector, causing it to settle at a much lower level of production than in the pre-crisis period," the bank said in the report.
Shares in Singapore Airlines, the world's second-largest by market capitalisation, have fallen four per cent this week on fears of a hit to travel demand.
Singapore's manufacturing sector, which accounts for about a quarter of the economy, should pick up slightly on the back of global restocking, but its key electronics sector may slip back as demand remains weak and new orders could go to lower-cost foreign rivals, the central bank said.
The monetary authority earlier this month effectively devalued its currency, its main policy tool, but the move was less aggressive than some analysts had expected.
As manufacturing contracts, the overall job market is likely to shrink, with the construction sector bucking the trend thanks to government infrastructure projects, the central bank said.
Prospects for the financial sector also remain weak in the near term, the report said. Singapore is a regional financial and wealth management centre but banks have been laying off staff.
Excess supply in the global petrochemicals industry would hit Singapore's chemical producers.
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