Singapore's economy had its biggest contraction on record in the second quarter after factory orders fell and the SARS virus emptied hotels. The government signaled it will accept a weaker currency to bolster exports and revive growth.
GDP shrank an annual 12 percent from the previous three months after growing a revised 1.2 percent in the quarter to March 31. That was three times faster than the median forecast of seven economists in a Bloomberg survey for a 3.6 percent decline. From a year earlier, GDP shrank 4.3 percent, the government said, adding growth will resume in the second half of the year.
Singapore's report underlines the economic damage wrought in Asia by SARS, which infected 206 people and killed 32 in the city-state. The outbreak slashed visitor arrivals by two-thirds in April and May, preventing buyers from visiting factories, prompting Singapore Airlines Ltd to fire 414 workers and the 116-year-old Raffles Hotel to cut rates by a third.
"Some new business got delayed" because of SARS, said J.R. Ong, executive director at First Engineering Ltd, which makes plastic and optical parts for Hewlett-Packard Co and Seagate Technology. "Two or three potential customers couldn't visit us."
The 12 percent slide is the biggest drop since the 1970s, when the city-state started collecting quarterly data adjusted for seasonal factors, according to the government's statistics department.
Today's report indicates the economy won't grow any faster than 0.9 percent this year, said Lian Chia Liang, an economist at J.P. Morgan Chase & Co in Singapore, slashing his forecast of 1.3 percent growth. Last year, GDP expanded 2.2 percent.
The Monetary Authority of Singapore, in a twice-yearly policy statement, lowered the target for its currency, following a decline this year. The bank tries to keep the currency within an upper and lower limit, called a trading band. It doesn't disclose details of the trading band.
The central bank also brought forward its next meeting from next January to October. That means it may opt sooner for a further weakness in the local currency to raise the island's export competitiveness if the economy shrinks in the current quarter as well, Standard Chartered Bank's economist Joseph Tan and foreign exchange strategist Claudio Piron said in a research note.
Still, ``tentative signs of recovery suggest that this will not be required,'' the analysts said.
The Singapore dollar fell as much as 0.4 percent to S$1.7616 against its US counterpart after the announcement, according to Bloomberg data.
Services, which account for more than three-fifths of the island's economy, shrank 3 percent in the second quarter, while manufacturing contracted 7.5 percent from a year earlier, today's report said.
Even so, the trade and industry ministry said latest economic data showed the outlook will improve in the next few months and it will announce a new forecast for full-year growth next month. The government expects the US$88 billion economy to expand between 0.5 percent and 2.5 percent this year.
Global tourism and business travel is reviving, following a World Health Organization announcement last week that the SARS epidemic has been contained. That will help boost sales in Singapore's shopping malls, retail stores, restaurants and hotels.
Overseas visitors account for 6 percent of the city-state's US$88 billion economy, and 12 percent of retail sales on the island.
"Before, we didn't even see the light at the end of the tunnel," said John Mims, Singapore-based vice president of sales and marketing in Asia Pacific at Starwood Hotels and Resorts Worldwide Inc. "Now, companies are saying they're ready to rebook and we're starting to see that interest come back."
NO HUMAN ERROR: After the incident, the Coast Guard Administration said it would obtain uncrewed aerial vehicles and vessels to boost its detection capacity Authorities would improve border control to prevent unlawful entry into Taiwan’s waters and safeguard national security, the Mainland Affairs Council (MAC) said yesterday after a Chinese man reached the nation’s coast on an inflatable boat, saying he “defected to freedom.” The man was found on a rubber boat when he was about to set foot on Taiwan at the estuary of Houkeng River (後坑溪) near Taiping Borough (太平) in New Taipei City’s Linkou District (林口), authorities said. The Coast Guard Administration’s (CGA) northern branch said it received a report at 6:30am yesterday morning from the New Taipei City Fire Department about a
IN BEIJING’S FAVOR: A China Coast Guard spokesperson said that the Chinese maritime police would continue to carry out law enforcement activities in waters it claims The Philippines withdrew its coast guard vessel from a South China Sea shoal that has recently been at the center of tensions with Beijing. BRP Teresa Magbanua “was compelled to return to port” from Sabina Shoal (Xianbin Shoal, 仙濱暗沙) due to bad weather, depleted supplies and the need to evacuate personnel requiring medical care, the Philippine Coast Guard (PCG) spokesman Jay Tarriela said yesterday in a post on X. The Philippine vessel “will be in tiptop shape to resume her mission” after it has been resupplied and repaired, Philippine Executive Secretary Lucas Bersamin, who heads the nation’s maritime council, said
REGIONAL STABILITY: Taipei thanked the Biden administration for authorizing its 16th sale of military goods and services to uphold Taiwan’s defense and safety The US Department of State has approved the sale of US$228 million of military goods and services to Taiwan, the US Department of Defense said on Monday. The state department “made a determination approving a possible Foreign Military Sale” to the Taipei Economic and Cultural Representative Office in the US for “return, repair and reshipment of spare parts and related equipment,” the defense department’s Defense Security Cooperation Agency said in a news release. Taiwan had requested the purchase of items and services which include the “return, repair and reshipment of classified and unclassified spare parts for aircraft and related equipment; US Government
More than 500 people on Saturday marched in New York in support of Taiwan’s entry to the UN, significantly more people than previous years. The march, coinciding with the ongoing 79th session of the UN General Assembly, comes close on the heels of growing international discourse regarding the meaning of UN Resolution 2758. Resolution 2758, adopted by the UN General Assembly in 1971, recognizes the People’s Republic of China (PRC) as the “only lawful representative of China.” It resulted in the Republic of China (ROC) losing its seat at the UN to the PRC. Taiwan has since been excluded from