Singapore Probably Neared a Recession Last Quarter

By Shamim Adam

Oct. 9 (Bloomberg) -- Singapore's economy probably teetered near a recession in the third quarter as slowing growth in its biggest markets hurt exports and a global credit crisis threatened financial services.

Gross domestic product expanded an annualized 0.3 percent from the second quarter, after shrinking 6 percent in the previous three months, according to the median estimate of 11 economists in a Bloomberg survey. Four of the economists expect a second quarter of contraction, marking a recession. The government will release the data at 8 a.m. tomorrow.

Asia's economies face a deepening slowdown as exports weaken amid the escalating global credit crunch that's toppled banks in the U.S. and Europe. That may prompt Singapore's central bank to favor slower gains in the currency in its exchange-rate review tomorrow, joining South Korea, Taiwan, Hong Kong and China, which eased policy by cutting interest rates this week.

``In a synchronized slowdown in all the major markets, it is inevitable for Singapore to experience slower growth or rather weak growth for a rather prolonged period,'' said Alvin Liew, an economist at Standard Chartered Plc in Singapore. ``The easing policy would provide some reprieve for export-oriented sectors.''

Singapore will revise its 2008 economic growth forecast tomorrow, Finance Minister Tharman Shanmugaratnam said in Dubai yesterday. The government in August cut the forecast for a second time this year to between 4 percent and 5 percent as exports fell and tourist arrivals eased.

Rate Cuts

The $161 billion economy probably expanded 0.8 percent from a year earlier last quarter, the slowest pace in five years, a separate survey showed.


Singapore is one of the first countries in Asia to release third-quarter figures, and its weaker expansion may herald a slowdown throughout the region as consumer confidence deteriorates, banks extend fewer loans and companies cut spending and hiring.

Asia Pacific countries had started to cut interest rates as policy makers shifted their focus to supporting growth from fighting inflation, even before yesterday's coordinated rate reductions by global central banks to limit the economic impact of the worst financial crisis since the Great Depression.

The Reserve Bank of Australia this week lowered its key interest rate by one percentage point, the most since a recession in 1992, citing growing evidence of a ``significant moderation in growth in Australia's trading partners in Asia.''

The People's Bank of China last month lowered the one-year lending rate for the first time in six years. It pared its one- year lending and deposit rates by 0.27 percentage point within minutes of rate cuts by the U.S. Federal Reserve and five other central banks yesterday.

Global Recession

``We've ratcheted down another notch as far as the weakening in global economic activity goes,'' said David Cohen, an economist at Action Economics in Singapore. ``It looks like it'll be pretty hard to avoid a global recession.''

Global stocks tumbled this week before central banks in the U.S., Europe and Asia started their concerted interest-rate cuts late yesterday, on concern more banks will fail as the credit crisis deepens and pushes the global economy into recession.

Japan's Nikkei 225 Stock Average yesterday had its biggest drop since October 1987, and stock exchanges in Russia and Indonesia halted trading after their benchmark indexes tumbled more than 10 percent.

``The global economy is entering a major downturn,'' the International Monetary Fund said in a staff report dated Oct. 4. ``Many advanced economies are now close to recession, while emerging economies are also slowing rapidly.''

Exports, Services

Singapore's government expects exports to decline this year, and the island's shipments of electronics goods have fallen for 19 consecutive months. Manufacturing, which accounts for a quarter of the economy, contracted in July and August. Services growth slowed in the second quarter.

Slower gains in the Singapore dollar may help exporters by keeping prices of the island's goods competitive. The Monetary Authority of Singapore in April allowed a faster appreciation in the currency to cool inflation at a 26-year high.

The following table gives forecasts for the percentage change in gross domestic product from a year earlier and the annualized, seasonally adjusted change from the previous quarter.

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                             GDP       GDP
Firm                         YoY  QoQ saar
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Median                      0.8%      0.3%
Average                     0.9%     -0.3%
High                        2.7%      6.2%
Low                        -1.0%     -7.4%
Number of Estimates           13        11
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Barclays Capital            0.5%      0.8%
CIMB-GK Research           -0.6%     -6.0%
Citi                       -1.0%     -7.4%
DBS Bank                    0.8%     -0.4%
Forecast Ltd.               2.6%      6.2%
HSBC Singapore              1.4%      2.0%
Ideaglobal                  0.7%      0.3%
ING Groep NV                1.0%      0.2%
JPMorgan Chase              1.4%      0.5%
Morgan Stanley              0.5%        --
Nomura Singapore            2.7%        --
OCBC Bank                   1.9%      3.0%
Standard Chartered          0.4%     -2.0%
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To contact the reporter on this story: Shamim Adam in Singapore at sadam2@bloomberg.net