Singapore's Q3 GDP falls short

Barely months after emerging from its worst recession, Singapore is staring at the possibility of sliding back to the dumps after third-quarter data showed the economic rebound is sputtering.

Economists lined up to trim growth forecasts for this year after preliminary estimates for the September quarter showed GDP grew only 3.7 percent from the previous year, well short of analysts' forecast of between 5.7 to 6.5 percent.

Most of the new forecasts are below 3 percent, the lower end of the government's official target of up to 4 percent.

Deputy Prime Minister Lee Hsien-loong, who is also finance minister, however said Singaporeans should not panic or overreact, and that the official growth target remains within sight.

He said "3.7 [growth in the third quarter] is not bad. It's lower than we expected and took analysts by surprise, but maybe it's not the economy's fault but the analysts' themselves who had too high expectations."

Singaporeans should "maintain an even keel" and expect fluctuations in the export-driven economy because of the volatile external environment, he added.

On a quarter-on-quarter basis, GDP shrank 10.3 percent in the third quarter, compared to a 13.2 percent growth in the three months to June, according to preliminary trade ministry figures.

Analysts said the economy needs a strong, last-minute sprint of about 6 percent growth in the final three months of the year to achieve the midpoint of government's 3 percent-to-4-percent full-year targets.

But doubts are mounting on the strength of a fourth-quarter expansion amid fears of a double dip, or a second recession in the US economy and global market volatility amid talks of a US-led war against Iraq.

The 10-day ports shutdown in the US west coast should also affect fourth quarter data, analysts said.

Should the next quarter GDP fall for the second consecutive time on a quarter-on-quarter basis, Singapore will be considered again in recession. The economy shrank two percent last year as the city-state suffered its worst recession since independence in 1965.

Jimmy Koh, head of treasury research at United Overseas Bank, said a return to recession is "not totally impossible" although he still hopes the economy should avoid going back to the dumps.

Koh believes a downturn in the fourth quarter would be limited only to certain sectors such as the services industry.

But Lehman Brothers securities brokerage said it expects electronics, which make up about 60 percent of the island's exports, to continue its slowdown late into the year.

This would push the unemployment rate up and "snuffing out the fledgling improvement in consumer demand," it said.

Chia Woon-khien, ING Barings senior regional economist, said given the poor third quarter GDP figures, another slip into recession for Singapore may be "synchronised with [that of] the US."

The economy, whose fortunes are tied to trade with the rest of the world, only began expanding in the second quarter this year after four consecutive quarters of contraction.

Prime Minister Goh Chok-tong acknowledged that Singapore's recovery from the downturn "remains tentative because of the weakening global conditions".

The key non-oil domestic exports, made up mostly of electronics, in the eight months to August was 2.6 percent lower than last year, he said.

Global developments like a possible double dip in the United States and a military attack against Iraq would affect the island-nation's growth prospects, he added.