Singapore's economy unexpectedly shrank for the first time in a year, contracting at a 10.3 percent annual pace as Asian exporters suffered from a slump in global demand.
Stocks and the city's currency slid as the third-quarter contraction was a reversal from annual growth of 13.2 percent in the second quarter. From the year-earlier quarter, the economy grew 3.7 percent, the Ministry of Trade and Industry said, less than the 6.4 percent median growth forecast in a survey of nine economists by Bloomberg News.
The city's US$84 billion economy is the most dependent in Asia on exports and the first to report figures for the third quarter.
Prime Minister Goh Chok-tong this week said the government may have to cut its forecast for an expansion of between 3 percent and 4 percent this year because of a 10-day closure in US West Coast ports and the threat of a war in Iraq.
"The overall trend for all regional economies is peaking," said Xie Xin, an economist at Bank of America. "Singapore is very likely to go back to recession."
The Straits Times Index fell as much as 1.8 percent to 1,351.86 before recovering to 1,364.38 at 2:35pm Singapore time.
The Singapore dollar traded at S$1.7917, after sliding to as low as S$1.7933 against its U.S. counterpart from a high of S$1.7842.
Singapore may be ``forced to revise'' its full-year growth forecast in a month's time, Prime Minister Goh said at a World Economic Forum meeting in Kuala Lumpur this week. US business and consumer sentiment may falter further if a war in Iraq drags on for more than a few weeks.
"The possibility of the world going into a recession would be real," Goh said.
Singapore is the Asian nation most dependent on exports. The value of its exports of semiconductors, chemicals and other goods exceeds the nation's gross domestic product by more than half. In Hong Kong, exports account for 116 percent of GDP, and in Taiwan they account for nearly half the economy.
Today's report puts the Singaporean economy, which shrank 2 percent in 2001, on the edge of a second recession in two years.
Thanksgiving and Christmas season sales in the US hold the key, said JR Ong, executive director of Singapore-based First Engineering Ltd, which supplies parts to Hewlett-Packard Co and Seagate Technology Inc.
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