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Singapore’s economy in recession

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October 10, 2008

Singapore’s economy in recession
Singapore's trade-sensitive economy has declined for a second straight quarter, the government said Friday, meaning the city-state has entered a recession for the first time in six years, AFP reported.

The Ministry of Trade and Industry also revised downwards Singapore's full-year growth forecast to around three percent, citing a slowdown in the global economy and key domestic sectors.

In a move to confront the downturn, the Monetary Authority of Singapore -- its de facto central bank -- said it was easing monetary policy for the first time in more than four years.

Singapore is Southeast Asia's wealthiest economy in terms of gross domestic product (GDP) per capita but is heavily dependent on trade.

This makes it sensitive to hiccups in developed economies, particularly key export markets the United States and Europe.

The ministry said the impact of the worsening US financial crisis and the deepening credit crunch had weakened US consumer sentiment, which will affect demand from Asia and the rest of the world.

On a seasonally adjusted quarter-on-quarter annualised basis, real GDP declined by 6.3 percent in the third quarter after contracting 5.7 percent in the previous quarter, the ministry said.

While it did not describe the economy as being in recession, a technical recession is generally defined as two consecutive quarters of contraction in economic output.

Singapore's last technical recession occurred in 2002 while the most recent full-scale recession was in 2001, when the economy contracted 2.4 percent during the year.

In August the government had revised down its full-year GDP forecast to 4.0-5.0 percent but since then, external economic conditions have deteriorated more than expected and some sectors of the economy have weakened significantly because of industry-specific or domestic factors, the ministry said.

"Singapore's export-oriented sectors, such as manufacturing, will be affected," it added.

Last year the economy expanded 7.7 percent but after years of growth, signs of a slowdown emerged with recent disappointing trade data and contractions in the important manufacturing sector, which includes the export-dependent electronic and pharmaceutical industries.

In August, key non-oil domestic exports fell for the fourth straight month, with electronic shipments continuing a decline begun in February 2007, while manufacturing dropped by 12.2 percent.

The August fall in output followed a 21.5 percent decline the previous month. The government's preliminary third-quarter GDP estimates are based largely on data from July and August, and are subject to revision.

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