Singapore's Economy Probably Shrank on Manufacturing

By Shamim Adam

Nov. 20 (Bloomberg) -- Singapore's economy probably shrank last quarter as a manufacturing slump and easing demand for financial services drove the nation into its first recession since 2002, adding pressure on policy makers to stimulate growth.

Gross domestic product declined an annualized 6.3 percent from the second quarter, after shrinking 5.7 percent in the previous three months, according to the median estimate of 10 economists in a Bloomberg survey. That matches last month's initial estimate by the government, which will release the revised data at 8 a.m. tomorrow.

Singapore is bringing forward its 2009 budget announcement to January from February and plans to help companies secure loans and train retrenched workers as the global credit crunch pushes the world into a recession. The central bank, which ended a policy favoring gains in its currency to bolster the economy last month, may seek a weakening by April, analysts say.

``The situation warrants urgency,'' said Vishnu Varathan, an economist at Forecast Singapore Pte. ``We can expect a generous budget aimed at mitigating the sharp slowdown that is expected in growth. As far as monetary policy is concerned, we expect that more easing moves will be under way given the escalation of risks from the deterioration in global economic and financial conditions.''

The Singapore dollar fell as much as 0.3 percent to 1.5336 against the U.S. currency today, and traded at 1.5293 as at 10:28 a.m. local time.

Policy Announcements

Traders are awaiting the growth data ``and likely some growth-supportive fiscal policy announcements, with some market speculation about an inter-meeting easing on the monetary policy front,'' analysts including Emmanuel Ng at Oversea-Chinese Banking Corp. said in a research note to clients today.

There is ``a very high chance'' that the central bank will ease policy before the next meeting in April, Varathan said.

The Monetary Authority of Singapore, which conducts monetary policy by guiding the currency within an undisclosed band based on a basket of major trading partners' currencies, may be open to depreciation to help revive exports and the economy, UBS AG currency strategists Ashley Davies and Nizam Idris wrote this week.

Asian policy makers and their counterparts around the world have lowered interest rates and announced economic stimulus plans in recent weeks as the global financial crisis that's toppled banks in the U.S. and Europe forced companies such as Citigroup Inc. to eliminate thousands of jobs. That's pushed the U.S., Japan, Europe, Hong Kong and New Zealand into recession, hurting demand for Singapore's exports.

The island's exports have dropped for six straight months and Prime Minister Lee Hsien Loong foresees several years of slow growth. The trade ministry predicts Singapore will grow about 3 percent in 2008 from a year earlier, the weakest pace in seven years.

The $161 billion economy probably shrank 0.5 percent from a year ago last quarter, after gaining 2.3 percent between April and June, a separate survey showed. That prediction matches the government's estimate released Oct. 10.

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.

-------------------------------------------
                            GDP       GDP
Firm                         YoY  QoQ saar
-------------------------------------------
Median                     -0.5%     -6.3%
Average                    -0.5%     -5.0%
High                       -0.2%      3.2%
Low                        -0.7%     -7.0%
Number of Estimates           16        10
-------------------------------------------
Action Economics           -0.5%     -6.3%
Barclays Capital           -0.3%        --
CIMB-GK Research           -0.7%     -7.0%
Citi                       -0.5%     -6.3%
Credit Suisse              -0.3%      3.2%
DBS Bank                   -0.5%     -5.9%
HSBC Singapore             -0.2%     -4.5%
Ideaglobal                 -0.4%     -3.8%
ING Groep NV               -0.5%     -6.3%
JPMorgan Chase             -0.6%     -6.6%
Moody's Economy.com        -0.6%        --
Morgan Stanley             -0.5%        --
Nomura Singapore           -0.5%        --
OCBC Bank                  -0.5%        --
Standard Chartered         -0.7%     -6.5%
UBS                        -0.5%        --
-------------------------------------------

To contact the reporter on this story: Shamim Adam in Singapore at sadam2@bloomberg.net