Singapore economic outlook worse than forecast
14 Apr 2009
The global economic downturn seems to be getting no better with more countries projecting a slowing down of their economies. Singapore has joined the growing number of countries reporting depressed economic outlook. The country's economy is expected to shrink as much as 9 per cent this year.
The trade ministry said in a statement that the economy may contract 6 per cent to 9 per cent. This is the third time the government has reduced its forecast since Janaury. Previous figures had pegged the decline to around 5 per cent.
The central bank has said that it would adjust the trading range for the Singapore dollar. This marks the first time the bank has lowered the band since 2003 in a bid to revive growth. Singapore stocks fell with falling exports and manufacturing job losses. Meanwhile, the government has introduced measures to reduce taxes and subsidise jobs.
According to economists the situation is dire and the central bank's policy is aimed at improving sentiment to help revive the economy. They say the policy move gives the bank the flexibility to weaken the currency for the present and strengthen it when things improve.
The heat of the worst global economic slump since world war II has singed many trade dependent Asian economies. Thailand's economy is also badly hit by the deepest slowdown in more than a decade and all indicators point to a contraction bigger than the 3 per cent decline forecast initially. Finance Minister Korn Chatikavanij has said the government would have to revise its growth forecasts following continuing political unrest and anti-government protests
Currency Band
Singapore's Straits Times Index of stock declined 0.5 per cent breaking a two-day 5.2 per cent rise.
The Monetary Authority of Singapore which manages price stability on exchange rate said with the local dollar trading low on the target range since October, the band will be ''re-centered'' to reflect recent levels.
The re-centering effectively amounts to a 1.7 per cent devaluation of the Singapore dollar on a trade-weighted basis according to economists.
Inflation Easing
Meanwhile analysts predict that inflation will continue to ease with cheaper commodities and a weakening economy.
The country's gross domestic product declined an annualised 19.7 per cent in the last quarter from the previous three months, after shrinking 16. 4 per cent according to Singapore's trade ministry. This was more than double predicted in a Bloomberg survey.
Elsewhere in the region the Philippines government warned that the impact on their economies could be more severe than previously expected. Officials in Manila said the
government plans to lower the growth estimate from the previous forecast of between 3.7 per cent and 4.4 per cent to 3.1 per cent and 4.1 per cent.
