Worries over sluggish Singapore economy

by Romesh Navaratnarajah Singapore's GDP this year may grow by only 1.5 percent or less, following a weaker-than-expected performance in Q3, reported The Business Times.

According to the Ministry of Trade and Industry (MTI), GDP growth dropped to the bottom range of its previous forecast of 1.5 to 2.5 percent. If weak results in externally-oriented sectors continue in Q4, this may even fall below 1.5 percent.

As a result, many private sector economists have slashed their 2012 growth forecasts, following the sharp downgrade to Q3 GDP advance estimates. Moreover, they remain unconvinced that the rebound in non-oil domestic exports for October can be sustained for Q4.

On a seasonally adjusted annualised basis, Singapore's economy shrank by 5.9 percent during the last quarter. This is more than three-fold the expected 1.5 percent quarter-on-quarter contraction.

The year-on-year growth rate of 0.3 percent was also much lower than the 1.3 percent advance estimate and 0.9 percent market consensus in light of weak September trade and production figures.

As such, there was fresh talk of a technical recession – which Singapore avoided thanks to a revised sequential GDP growth of 0.5 percent in Q2. Nonetheless, some economists believe that the 1.5 percent growth forecast for the entire year assumes modest acceleration in Q4.

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