Economists predict almost no growth, moderate recovery in second half
By
Robin Chan
The MAS in its second half-yearly macroeconomic review said that expansion is tipped to be 'below its potential rate' of 4 to 6 per cent next year. -- PHOTO: ASSOCIATED PRESS
SINGAPORE'S slowing economy is likely to remain weak next year as the full impact of the financial crisis hits home, said the Monetary Authority of Singapore (MAS) yesterday.
The economy, already in a technical recession, will see 'further slippage... ahead' with the decline expected to spread to almost all sectors, from manufacturing to tourism.
Inflation to ease next year
CONCERNS over inflation are receding as oil and food prices come down and are expected to fall even more next year, said the Monetary Authority of Singapore (MAS) yesterday.
A weaker economy and property market will also mean lower consumer demand and falling rents, which will further help ease price increases and cost pressures, the central bank added in its latest Macroeconomic Review.
JOB losses are looming as Singapore's economy slows, with manufacturing and financial services companies expected to be among the first to cut staff.
This means unemployment is likely to rise over the next few quarters, while salaries will grow at a much slower pace, said the Monetary Authority of Singapore (MAS) in its latest half-yearly Macroeconomic Review, released yesterday.
The MAS in its second half-yearly macroeconomic review said that expansion is tipped to be 'below its potential rate' of 4 to 6 per cent next year.
The official growth forecast for this year has already been scaled down to about 3 per cent, while last week, Senior Minister Goh Chok Tong said that growth in 2009 could be below this year's projection.
Economists The Straits Times talked to predict practically no growth next year. Most expect expansion of between 0 and 1.5 per cent with a moderate recovery in the second half of next year.
Citigroup's Kit Wei Zheng, one of the more bearish economists with a tip that growth next year will be minus 1.2 per cent, said that 'a recovery in the second half of next year should not be taken for granted. Any recovery will be gradual and will not take the V-shape of past recessions.'
MAS said that ultimately a recovery will be 'predicated on the performance of the G-3 - the United States, Europe and Japan - and regional economies'.
The ripples from the financial tsunami are reaching virtually all important sectors. The report said Singapore's economy has 'entered a more advanced stage of weakness'.
Manufacturing and tourism have yet to feel the full force of the crisis but will eventually be hit as firms and consumers cut back on spending, in not only the G-3 economies, but across the region.
Electronics, which makes up 30 per cent of manufacturing, will continue its slide as firms scale down IT spending and defer outlays on tech upgrades.
The usually buoyant holiday season will offer scant relief for exporters since tech sales are likely to be lacklustre with consumers in major markets tightening their belts.
China, which analysts expect to grow at 7 to 8 per cent, is unlikely to give Singapore a boost because its recent contribution to export growth has been relatively small, said the MAS.
Tourism, with visitor arrivals in their third straight month of decline, is likely to be hit further as travellers from the region forgo holidays here.
The crisis has battered consumer sentiment and affected the financial services sector, property and real estate services, and shop and restaurant owners.
Cautious investors are choosing to put their money in safe assets or hoard cash, weakening the local wealth management industry. Asian hedge funds have also been hit by redemptions, forcing them to offload assets.
But the MAS believes that the domestic fund management industry has 'underlying strength with the ongoing structural wealth generation in Asia'.
Household wealth has been affected by falling asset prices so retail sales will be hit as consumers cut back spending. This will mean retailers could see slower business towards Christmas and into 2009, said the MAS.
One spot of relief is that the pharmaceuticals sector may offer some moderate cushion next year when two new facilities - belonging to Abbott and Novartis - are expected to open.
The drug-making industry largely operates on its own supply cycle, but has generally been weak this year due to a delay in new drug approvals from the US and competition from generic medicines.
The industry is also notoriously volatile. Last month's manufacturing figures were boosted by a surprising rebound in pharmaceutical output.
Another sector bucking the trend is construction, which will likely ride out 2009 well as backlogged projects awarded from previous quarters get under way, MAS said. Large-scale private sector projects like the integrated resorts and the Marina Bay financial centre will also keep the industry busy through 2010.
However, construction's share of GDP is small so any contribution to overall growth will be limited.
