By Ryan Huang | Posted: 08
August 2011 2130 hrs
SINGAPORE: Singapore has revised down its full-year
economic growth forecast for this year amid renewed turbulence in
the global financial markets.
It is now expecting growth to come in at between 5 and 6 percent
instead of the original projection of 5-7 percent. This was
revealed by Prime Minister Lee Hsien Loong in his National Day
message on Monday.
And with the economic outlook looking more uncertain going forward,
economists are not ruling out a technical recession for
Singapore.
Asia, led by China and India, is expected to continue growing. But
the global outlook remains uncertain.
"Europe's debt problems are far from solved, despite the recent
bailout of Greece by the EU. The US economy remains sluggish. The
US President and Congress have agreed to raise the debt ceiling,
but have put off difficult decisions to raise taxes and cut
spending. Japan has the added burden of earthquake and tsunami
recovery," said Mr Lee.
"These three key economies are struggling to find the decisive
leadership required to resolve their domestic challenges. This will
weigh them down and dampen global prospects," he said.
That's one main reason the official forecast for Singapore's gross
domestic product growth this year has been trimmed.
The revision was not a surprise, with the Monetary Authority of
Singapore (MAS) alluding to it in its annual report released last
month.
In fact, some private sector economists have already cut their own
forecasts or are currently planning to revise their numbers.
CIMB were among the latest to downgrade its full-year forecast for
Singapore economy to 4.7 percent, from its earlier projection of 6
percent.
DBS and UOB said they are currently revising their numbers
downwards.
Weaker business sentiment is expected to be a drag on manufacturing
activity, especially in electronics.
Mr Song Seng Wun, CIMB Research's regional economist, said: "For
the full-year GDP, the slower production, the slower exports may
translate to the headline GDP being bumped down
slightly.....Another source of lower growth is obviously high
inflation. We've got slower growth but inflation has been higher
this year."
Mr Wu Kun Lung, Credit Suisse's economist, said: "We cut our 2011
and 2012 real GDP growth forecast for Singapore to 5.5% (from 6.5%)
and 4.8% (from 5%), respectively, with downside risks if the
European debt situation deteriorates further. We expect the 3-month
Singapore SIBOR to stay unchanged at 0.44% till end-2012 (from 1%
previously)."
Prime Minister Lee said the Singapore economy grew 4.9 percent in
the first half. This suggests that the second-quarter GDP grew 0.5
percent year-on-year, in line with flash estimates.
Advance estimates released last month also showed the
second-quarter GDP contracted 7.8 percent from the previous three
months.
With growth expected to slow for the rest of the year there are now
higher expectations of a technical recession, which is defined as
two consecutive periods of quarter-on-quarter contraction.
But some said this could be good for Singapore.
UBS' chief investment strategist (Singapore) Kelvin Tay said: "We
don't see a prolonged period of stagnant growth. In fact I think a
slowdown in the third quarter might actually do the economy some
good in the sense that we're a little bit too strong....in the
first quarter of this year.
"If the economy slows down a little bit....it could be positive,
because, don't forget, we are actually at full employment, with
unemployment at an all-time low right now. So that will take some
heat off the economy."
Singapore's unemployment rate in the first half remained at 2.1
percent.
Going forward, there are some bright spots for the Singapore
economy. Commodity prices have been dropping recently and this
could help exporters as well as rein in inflationary
pressures.
Detailed second-quarter GDP data will be released on
Wednesday.
- CNA
