Manufacturing, services hard hit; construction sector only bright spot
THE verdict is finally in.
Singapore's economy grew a dismal 1.1 per cent last year, as the worldwide recession dealt severe blows to its key manufacturing and services sectors.
Both shrank in the fourth quarter - services for the first time since 2001 - and pushed the economy into the red with a worse-than-expected 4.2 per cent contraction in the quarter.
The final figures, released by the Ministry of Trade and Industry (MTI) yesterday, capped a tumultuous 12 months that saw the official growth estimate for 2008 being revised seven times.
Just last month, MTI had estimated that the economy grew 1.2 per cent last year. At its most optimistic, in November 2007, MTI expected economic expansion of between 4.5 per cent and 6.5 per cent last year.
This brand of economic uncertainty looks set to continue well into this year. MTI's official forecast is for the economy to shrink between 2 per cent and 5 per cent, although Prime Minister Lee Hsien Loong recently hinted worse might be in store.
While economists largely stood at the brighter end of the spectrum last month, many of them have since downgraded their forecast for the year's growth to be nearer to the worst-case scenario.
DBS Bank and OCBC Bank now think the economy will shrink 4.8 per cent while Credit Suisse puts it at 5 per cent.
'It is hard to envisage a recovery scenario earlier than late 2009,' said OCBC economist Selena Ling.
There is 'no light at the end of the tunnel' as yet, with regard to the financial sector returning to normal and economic growth in the United States, Eurozone, Japan and China stabilising.
DBS economist Irvin Seah highlighted three key risks this year: The US government's restructuring of its ailing banking sector, the slowdown of the Chinese economy and the uncertainties around eastern European economies, which will affect Eurozone growth. 'All signs seem to be pointing in the direction' of the economy shrinking near to the Government's worst-case scenario, he said.
The jobless rate for last year was 2.3 per cent, up from 2.1 per cent previously. 227,200 jobs were created last year, fewer than the 234,900 seen in 2007.
Manufacturing and services are likely to stay in the red for at least the first half of the year, economists predict.
The manufacturing sector, which makes up about a quarter of Singapore's total output, shrank 10.7 per cent in the fourth quarter and 4.1 per cent over the full year last year.
But it was the services industries that led the decline. This sector, which makes up three-fifth of the economy, shrank by 1.3 per cent in the fourth quarter, much more than the 0.1 per cent contraction MTI had estimated.
For the whole of last year, services grew only 4.7 per cent, less than the 5 per cent growth previously estimated and the strong 8.1 per cent growth in 2007.
Construction, the third pillar of the economy but by far the smallest, was the only sector that did better than predicted. It grew a strong 20.3 per cent last year, up from the 17.9 per cent that was estimated last month and even outperforming 2007's growth of 18.2 per cent.
Source: Straits Times, 27 Feb 2009