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February 23, 2009

Singapore’s economy to contract further
Singapore's economy could contract by more than a government forecast of between -2 and -5 percent this year if the global economy continues to shrink, the Business Times quoted Prime Minister Lee Hsien Loong as saying.

"Our GDP growth is forecast to be between -2 and -5 percent. It could be worse if the global economy worsens, even lower than -5 percent is possible," Lee was quoted as saying at a government function on Sunday.

The government slashed its growth projection on January 21 to a contraction of between 2 and 5 percent, from a range of minus 2 percent to plus 1 percent. Like other export-reliant Asian economies, tiny Singapore has been pummeled by a collapse in consumer demand as economies slow sharply around the world.

In January, Lee said the government's S$20.5 billion ($13.4 billion) stimulus package would not immediately lift the country out of a recession, which may possibly last for the whole of 2009.

In the speech to unionists and white collar professionals on Sunday, Lee said the next six months would be tough for Singapore as economic fallout in Eastern Europe could worsen the global recession, led by tthe United States and the European Union.

"It is a big problem for the European banks who are exposed to Eastern Europe, it is a problem for Asia too because the same European banks are very active and big lenders in Asia," the Strait Times quoted him as saying.

"So let us prepare for a very tough year ahead and let us be psychologically ready to think in terms of several slow years after that."

Last month the government said in its budget it would for the first time tap government reserves to pay for a stimulus package to help companies and save jobs, as the country grapples with its worst-ever recession.

Singapore's non-oil exports fell 34.8 percent in January from a year earlier, the worst fall since records began in 1977, and analysts said the worst is yet to come. Lee said the next two quarters would be "especially tough and let's fasten seat belts."





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