Singapore has become the first Asian economy to fall into recession, analysts said yesterday, after the government revised downward its full-year growth estimate and eased monetary policy for the first time in years.
The Ministry of Trade and Industry lowered the city-state’s full-year growth forecast to around 3 percent, citing a slowdown in the global economy and key domestic sectors.
The move came as the ministry released preliminary data showing that 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 will be the first Asia economy to fall into a technical recession,” DBS Group Research said in an assessment of the data.
In a move to confront the downturn, the Monetary Authority of Singapore (MAS) — its de facto central bank — said it was easing monetary policy for the first time in more than four years.
“The Singapore economy has weakened over the course of 2008, alongside an escalation in the turmoil in financial markets and a more severe deceleration in global economic activity,” MAS said.
These developments meant new uncertainties for the Singapore economy, while slower Asian growth would restrain activity in a range of service industries such as transportation and tourism, it said.
“The risks to external demand conditions continue to be on the downside and a more severe global downturn cannot be discounted,” the bank said.
Singapore is Southeast Asia’s wealthiest economy in terms of GDP per capita, but is heavily dependent on trade. This makes it sensitive to hiccups in developed economies, particularly key export markets the US and Europe.
Economists polled by Dow Jones Newswires had forecast a 0.3 percent quarter-on-quarter rise in GDP, the value of goods and services produced in the economy.
Compared with the third quarter of last year, the ministry said Singapore’s economy contracted by 0.5 percent in real terms, against the 0.8 percent expansion foreseen in the Dow Jones poll.