ASEAN KEY DESTINATIONS
Europe debt crisis to hit Singapore hard
Singapore on 21 Nov 2011 predicted sharply lower economic growth of 1.0-3.0 percent in 2012 amid an export slowdown and warned the situation could worsen if Europe's debt woes trigger a global crisis.
The figure is off the previous estimate of 2.5-3.5 percent and well down from the five percent predicted for 2011 as demand in the city-state's key export markets in Europe and the United States dries up.
"This does not factor in downside risks to growth, such as a worsening debt situation or a full-blown financial crisis in the advanced economies," the Ministry of Trade and Industry (MTI) said in a statement.
"Should these risks materialise, growth in the Singapore economy in 2012 could come in lower than expected," it added.
The 2011 gross domestic product (GDP) forecast is a huge slowdown from the all-time high of 14.5 percent seen in 2010 when the economy was coming off a 0.8 contraction the previous year.
Singapore's trade-driven economy is regarded as a bellwether for Asia's exporters, which depend heavily on electronics and other manufactured shipments to North America and Europe for growth.
Asia's fate will depend to a large degree on whether Europe can contain its debt crisis which has engulfed large economies including Italy and Spain, according to Chua.
Singapore's GDP was valued at S$284.6 billion in 2010, and total trade was more than three times as large.
"The longer the European debt crisis drags out with no clear solutions, it will have a negative impact globally," said Selena Ling, an economist with Singapore's Oversea-Chinese Banking Corp.
"We are starting to see the impact come through."
The MTI said it expects Singapore's electronics industry and other sectors that rely heavily on overseas orders to remain under pressure despite support from Asia's better-performing economies.
Even the financial services sector will be affected by heightened uncertainties in the external environment, it added.
The forecast came as data released separately on Monday by the trade promotion body International Enterprise Singapore showed electronics exports tumbling 17 percent in the third quarter from a year ago.
The ministry's downbeat projections for 2012 came as it released third-quarter figures showing GDP grew 6.1 percent, an improvement from 1.0 percent in the second quarter.
Singapore is a significant producer of high-end telecommunications and computer-related parts shipped to the rest of the world as well as petrochemical and pharmaceutical products.
"Within the manufacturing sector, the electronics cluster is expected to register a lower level of output given the downturn in the global electronics cycle," the MTI said.
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