Download Odds of below 4% Spore growth now `more than 50%`

The Business Times, Wednesday, September 17, 2008
Odds of below 4% Spore
growth now 'more than 50%'
By OH BOON PING
[SINGAPORE] The odds on
Singapore's economic growth slowing to less than
.4 per cent this year are now
more than 50 per cent, says
economist Choy Keen Meng
of Nanyang Technological
University (NTU).
Responding to questions
from the media, Dr Choy
said there is now five or six
in 10 chances of that happening, after the latest upheaval in the financial markets.
"However; there are still
lots of imponderables," he
said. "Much' depends on
how the US Fed reacts to
the latest crisis, and its im
pact on consumer sentiment."
Dr Choy was speaking at
a briefing on the latest set
of macroeconomic forecasts from NTU's Economic
Growth Centre (EGC).
EGC's official prediction
puts Singapore's GDP
growth this year at 4 per
cent, which is consistent
with the 4-5 per cent range
given by the Government.
But EGC's forecast does
not take into account the spillover effect from the latest
news of Lehman Brothers'
collapse and Merrill
Lynch's sale to Bank of
America, amid a deepening
credit crisis.
On. Monday,
158-year-old Lehman filed
for bankruptcy protection
under a massive weight of
debt, while Merrill Lynch
agreed to be taken over by
Bank of America.
For the current quarter,
NTU projects growth of 1.9
per cent, followed by a rebound to 4 . 9 per cent in Q4.
Its GDP growth estimate
next year is 4.2 per, cent,
suggesting a quick economic rebound appears . unlikely.
At sectoral level, manufacturing is expected to contract 4.2 per cent before recovering to grow 1.3 per
cent in the `final quarter of
this year.
"The writing was already on the wall when we
look at the non-oil domestic
exports (NOI)X) and factory
output figures in July. Both
were in negative territory,"
said Dr Choy.
Singapore's NODX
shrank 5.7 per cent in July,
while factory output contracted a drastic 21.9 per
cent.
Surprisingly, global chip
sales have been affected little by the economic slowdown so far , as seen from
the 5.3 per cent and 8 per
cent sales growth in Q1 and
Q2. But even though economists forecast 10.5 per cent
and 12 . 4 per cent growth in
Q3 and Q4, there are signs
that a slowdown could happen as early as the first
quarter of 2009.
Using , the Electronics
Leading Index - an EGC
in-house index - as a guide,
Dr Choy said a slowdown
could hit in six to nine
months, even though chip
sales could post a recovery
in the second half of next
year.
Construction activity
here is expected to grow at
a slower 15.1 per cent this
quarter and 8.8 per cent
next quarter- down from
17.4 per cent in Q2, while
services sector growth is
projected at 4.8 per cent
and 7.3 per cent this quarter and the next.
Commenting on the Formula One race here, Dr
Choy said the event could
fail to generate greater interest, partly due to the sluggish economic environment. But in the long term,
events like F1 should bode
well for tourism, he said.
Still, all is not gloom and
doom. The economists expect consumer price index
(CPI) growth to come down
to 6.7 per, cent in Q3 and 6
per cent in Q4, from 7.4 per
cent in Q2. As the effect of
the'high energy and food
prices wear off, next year's
CPI growth could moderate
to 3 per cent.
On labour market conditions, economist Randolph
Tan sees continuing
strength in that segment,
citing strong wage growth
and job creation in construction and services.
The unemployment rate
is projected to remain stable at 2.3 per cent this year,
but employment growth
could drop to 51,000 and
41,000 in Q3 and Q4 respectively - down from 71,400
in Q2 this year.