Singapore sees biggest-ever quarterly GDP fall

SINGAPORE, Jan 2, 2009 (AFP) - Singapore's economy could contract by as much as two percent this year, the government said Friday after data showed a deepening recession and the worst quarterly GDP decline on record.
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Real gross domestic product (GDP) fell by 12.5 percent in the fourth quarter, on a seasonally adjusted annualised quarter-on-quarter basis, which the trade ministry said is the biggest fall since records began in 1976.
"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 the sharp fourth quarter contraction in the trade-dependent economy for its revised 2009 growth forecast, which now ranges between a contraction of 2.0 percent and expansion of 1.0 percent.
"The fourth quarter was a little bit weaker than most of us were projecting," said David Cohen, director of Asian forecasting at global research house Action Economics.
"This is clearly a major global downturn and Singapore is taking its lumps."
The trade ministry downgraded its previous growth estimate, made in November, which ranged between a contraction of 1.0 percent and expansion of 2.0 percent in 2009.
Singapore in October became the first Asian economy to enter a recession but since then major economies around the world -- including the city-state's key export markets the European Union and United States -- 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.
The quarter-on-quarter fall in GDP of 12.5 percent compared with a decline of 5.4 percent in the third quarter, the trade ministry said. In the second quarter, the economy fell by 5.7 percent.
Measured against the fourth quarter last 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, Prime Minister Lee Hsien Loong warned of "a difficult year ahead" after the economy grew 1.5 percent in 2008.
In 2007 the economy expanded by 7.7 percent, the trade ministry said.
It noted that analysts have lowered their growth forecasts for the United States, Europe and Japan by about one percentage point, while the outlook for regional economies has also deteriorated.
"These developments will affect the sectors in the Singapore economy that rely on the movement of goods and services in the region," the trade ministry said.
Weaker global demand has affected Singapore's electronics and precision engineering industries, pulling the entire manufacturing sector down by an estimated 9.0 percent in the fourth quarter compared to the same time last year, the ministry said.
Chemicals output also fell because of slowing external demand, while growth in the service industries slowed to an estimated 1.1 percent from 5.3 percent in the third quarter, it added.
Cohen said the extent of the slowdown in services was unexpected.
A contraction in industrial building saw construction sector growth slow to 13.3 percent, down from 18.6 in the preceding quarter, the ministry said.
Cohen said his forecast for Singapore has been downgraded to a 2.0 percent contraction this year, from a one-percent shrinkage projected earlier.
"It does look like we're going to see an annual contraction in 2009."
That would leave the economy in its worse shape since 2001 when growth fell by 2.4 percent, according to official data.