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February 27, 2009

Singapore: Growth seen lower than forecasts
Some private sector economists have started to revise their economic growth forecasts for the Singapore economy, reported Channel News Asia, the city-state’s online news portal.

Their move comes after official data showed the economy grew 1.1 percent for the whole of last year, significantly lower than the 7.8 percent recorded in 2007.

OCBC Bank, for one, now believes the Singapore economy will contract 4.8 percent this year, instead of its previous prediction of a 2.8 percent decline.

With fewer people spending and poor investor confidence, the services sector - like hotels and restaurants - took one of the biggest hits. Its growth slowed to 4.7 percent for the whole of last year, compared to 8.1 percent in 2007.

Head of treasury research and strategy at OCBC Bank, Selena Ling, said: "We do think that services growth, which was actually negative in the last quarter of 2008, will probably sink deeper into the red for the first half of this year.

"And due to the sheer size of the services sector, especially with the declines that we're seeing in the financial services sector, we do think that we'll see services sector roll over for the whole of this year. And hence, our full year GDP forecast is now -4.8 percent."

This is the same rate that DBS is predicting. DBS is also warning that the downside risks remain high in the near term.

DBS' group research economist, Irvin Seah, said the uncertainties concerning how the US government is going to restructure its ailing banking sector, the slowdown in the Chinese economy, as well as economic risks in the eastern European economies, are some of the key risks ahead.

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