ASEAN KEY DESTINATIONS
Singapore trims growth forecast, unveils credit support plan
Singapore has further downgraded its growth forecast for 2008 and pledged $1.5 billion in credit support for businesses trying to survive a recession and the global financial crisis, reported AFP.
The support package came as the government said its economy could contract in 2009 after weaker than expected third-quarter GDP figures.
The city-state's economy, already in recession, was now expected to grow by about 2.5 percent this year, down from about three percent previously forecast, the Ministry of Trade and Industry (MTI) said.
Next year, it saw GDP ranging between a contraction of 1.0 percent and growth of 2.0 percent.
The ministry said gross domestic product (GDP) fell by an annualised 6.8 percent in the third quarter ended in September, after a fall of 5.3 percent in the second quarter. The figures were worse than expected.
"Singapore may see its worst recession ever," said CIMB-GK regional economist Song Seng Wun. He predicted GDP could shrink two to five percent annually over the next couple of years.
Preliminary government data released last month, when trade-dependent Singapore became the first Asian economy to fall into recession, showed that real GDP declined by 6.3 percent in the third quarter after contracting 5.7 percent in the previous three months. GDP is the value of all goods and services produced by an economy.
A poll of economists by Dow Jones Newswires had forecast a 6.3 percent quarter-on-quarter decline in growth for the three months ended in September.
Singapore is Southeast Asia's wealthiest economy in terms of GDP per capita but its heavy dependence on trade makes it sensitive to problems in developed economies, particularly the key export markets of the United States and Europe.
The European Union has fallen into recession and, this week, the US Federal Reserve highlighted the potential for recession there over the next year.
The $1.5-billionr support package was designed to help businesses gain access to much-needed credit.
The government "is enhancing its business financing schemes to support an additional 2.3 billion Singapore dollars ($1.5 billion) in loans to help local firms gain access to credit," the trade ministry said.
Up to 124,000 local companies will be eligible to benefit from the various schemes, which take effect on December 1, it added.
"Consumer and business confidence indicators across the major economies are weak. The contraction in global demand has hit regional economies too," the ministry said in a separate statement.
"As a result, Singapore's trade volumes and other indicators of regional demand, including visitor arrivals, have fallen."
The manufacturing sector was hardest hit in the third quarter, led by electronics and biomedical sciences, MTI said.
Growth in the service sector has also started to moderate. Service industries, which include hotels, restaurants and financial services, grew by 5.3 percent year-on-year in the third quarter compared with 7.1 percent in the previous quarter, the ministry said.
Compared with the same period last year, Singapore's GDP contracted by 0.6 percent in the third quarter in real terms, worse than the 0.5 percent previously estimated.
Next year, Singapore is expected to face a broad-based slowdown, the ministry added.
"Considerable uncertainty remains as to how deep and long this downturn will last," it said.
In addition to the loan support pledged Friday, Finance Minister Tharman Shanmugaratnam told reporters that a "significantly expansionary" budget to be delivered in January will emphasise help for businesses.
He said there will be only limited impact from an increase in domestic demand because Singapore is "a very small and very open economy with a very high import content in almost every area of spending."