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March 17, 2009

Singapore’s economy seen shrinking by 8.5%
Singapore's economy could shrink by a record 8.5 percent in the first three months of 2009, hit by a downturn in trade, and its currency could lose about 8 percent against the US dollar this year, a central bank survey showed.

The Singapore dollar is expected to slip to 1.56 to a U.S. dollar from 1.44 to a U.S. dollar at the end of 2008, the survey of 20 private economists showed.

Growth would pick up later in the year and narrow the contraction to 4.9 percent for the whole of 2009, the survey showed. Gross domestic product contracted 4.2 percent in the fourth quarter of 2008.

The economy grew 1.1 percent in 2008 from a year earlier. Despite a gloomy outlook for most industries, construction was expected to continue to grow 8.2 percent compared with 7.5 percent in a survey in December.

"As reflected by the mean probability distribution, the most likely outcome is for the Singapore economy to contract by 5.0 percent to 5.9 percent this year," the survey said.

Singapore's most powerful politician, former Prime Minister Lee Kuan Yew, told a Reuters forum this month that the economy could contract 10 percent this year if exports continue to weaken sharply.

Lee is still a minister in the cabinet of his son, Prime Minister Lee Hsien Loong, and his growth forecast is twice as bad as the government's official view. Non-oil domestic exports are expected to fall 17.5 percent in 2009, compared to an actual contraction of 7.9 percent in 2008, the survey said.

Manufacturing is also expected to decline 10.3 percent in 2009, down from a 4.5 percent fall in the December survey while unemployment is expected to rise to 4.4 percent from 3.4 percent in the same period.

Singapore's DBS Bank said in a recent research report the city-state could lose 99,000 jobs by mid 2010. A total of 16,880 workers lost their jobs in 2008, according to the Ministry of Manpower, but the unemployment rate was still at a low of 2.5 percent on a seasonally-adjusted basis at the end of December.

Annual inflation for 2009 is seen at a median 0.2 percent from an actual rise of 6.5 percent in 2008, said the survey, which does not represent the bank's own views or forecasts.
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