Downward revision by Govt comes on the heels of a poor first quarter
SINGAPORE'S full-year economic growth forecast was revised dramatically downwards by the Government yesterday - the third such change in less than four months.
The Government now expects Singapore's gross domestic product (GDP) to shrink between 6 and 9 per cent this year, instead of the 2 to 5 per cent contraction thought previously.
The downgrade was due to a sharp deterioration in the first quarter and weak global outlook for the rest of the year, said the Ministry of Trade and Industry (MTI).
Advance estimates - largely based on the first two months of the year - showed the GDP shrinking a record 11.5 per cent in the first quarter compared with the same period last year. This followed a 4.2 per cent contraction in the previous quarter.
Manufacturing slumped 29 per cent during the first quarter, while services retreated 5.9 per cent. The only growth evident was in the construction sector, which grew 25.6 per cent due to a strong pipeline of housing and infrastructure projects.
Economists say the first-quarter figure was the worst since quarterly data started being compiled in 1975. The previous low was a 6.4 per cent fall seen in the third quarter of 2001.
The MTI said its earlier forecast had factored in the likelihood of a weak first quarter, but advance estimates showed that actual GDP growth would undershoot earlier expectations by a significant margin.
And while there are signs of some stabilisation in the US housing, manufacturing and financial sectors, the MTI noted that they do not point to 'a clear turnaround' in economic activity.
The official forecast was first revised on Jan 2, with the range of -1 to 2 per cent being changed to -2 to 1 per cent. Three weeks later, it was updated to -2 to -5 per cent.
'This should be the final revision for the year,' said CIMB-GK economist Song Seng Wun. 'This is likely to be the bottom, the rate of contraction should narrow from now on.'
Source: Straits Times, 15 April 2009