Singapore’s economy could contract by as much as 2 percent this year, the government said yesterday after data showed a deepening recession in the trade-dependent economy.
The forecast marks a downgrade from the government’s previous estimate, made in November, which ranged between a contraction of 1 percent and expansion of 2 percent this year.
“The global economic crisis has worsened since November, with sharp declines in global demand, trade and investments,” the Ministry of Trade and Industry said in a news release.
It also cited a sharp fourth-quarter contraction in the Singapore economy for the weaker forecast.
Singapore in October became the first Asian economy to enter recession, but since then major economies around the world — including the city state’s key export markets the EU and US — have also seen declining economic activity.
Singapore is Southeast Asia’s wealthiest economy in terms of GDP per capita, but its heavy dependence on trade makes it sensitive to economic disturbances in developed economies.
On a seasonally adjusted annualized quarter-on-quarter basis, real GDP fell by 12.5 percent in the fourth quarter last year, compared with a decline of 5.4 percent in the third quarter, the trade ministry said. In the second quarter last year, the economy fell by 5.7 percent.
Measured against the fourth quarter the previous year, the economy contracted by 2.6 percent in real terms, after a 0.3 percent year-on-year fall in the third quarter.
GDP is the value of all goods and services produced by an economy.
The fourth-quarter figures are advance estimates based largely on October and November figures. More detailed information is to be released next month.
In his New Year’s Day message to the nation on Wednesday, Singaporean Prime Minister Lee Hsien Loong (李顯龍) warned the economy was likely to worsen this year after growing just 1.5 percent last year.
The performance was below the last official forecast of 2.5 percent growth, after earlier downgrades in last year’s growth outlook were made during the year.
In 2007, the economy grew by 7.7 percent, the trade ministry said.
“Our economy will probably contract further. More companies will be forced to downsize. So far we have not seen many job losses, but I expect more retrenchments in the next few months. We must be psychologically prepared,” the prime minister said.
“As a small, open economy, Singapore cannot avoid being hit. We earn our living by trading with and servicing the world. So the fall in worldwide demand has hit our exports, our tourism sector and our broader economy. We must therefore prepare for a difficult year ahead and especially the first half of 2009,” he said.