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 13 Apr 2009

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Singapore economy to decline 7-10% in Q1

Singapore’s trade-dependent economy is likely to have shrunk by a record figure in the first three months of this year, as exports plummeted at an unprecedented pace in January, the city state’s newspaper the Strait Times reported.

Compared to the same period last year, the contraction in the economy could be severe enough to land in the double digits - far worse than the 4.2 percent year-on-year decline seen in the fourth quarter of last year.

Preliminary figures on the first-quarter gross domestic product (GDP) will be released by the Ministry of Trade and Industry only tomorrow, but economists are already expecting the worst.

This is partly because Prime Minister Lee Hsien Loong has indicated that the Government will also announce tomorrow that it has lowered its forecast for full-year growth. The current prediction is for the economy to shrink between 2 percent and 5 percent this year.

Economists say the grimmer outlook is likely due to the crash in exports, which plunged a record 34.8 percent in January from a year earlier before improving slightly in February with a decline of 23.7 percent.

Export figures for last month will also be released tomorrow - three days earlier than planned - and are expected to remain weak, dragging down the first-quarter growth number.

Citigroup's Kit Wei Zheng estimates that the economy shrank 10 percent in the first quarter against the same period a year ago, which would be the worst-ever performance since records began in the 1970s.

Most other economists are weighing in with predictions of a contraction of between 7 per cent and 9 per cent. A government poll of 20 economists and analysts in February found that the average prediction was for a decline of 8.5 per cent.

“To say the Singapore economy is weak at present would be somewhat of an understatement,” sums up HSBC economist Robert Prior-Wandesforde, who is tipping a 9.1 percent contraction for the first quarter. He expects the economy to continue shrinking in the following three quarters.

“The primary cause is obvious - collapsing exports which are breaking all the wrong kind of records,” he said. Adding to that is also the bursting of bubbles in property, investment and credit, which grew in the run-up to the current crisis.




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