Singapore lowers 2009 forecast

The Singapore government has reduced the 2008 forecast for economic growth to around 2.5 percent and has indicated that the economy could shrink next year, assuming that the global financial crisis continues to affect the nation’s exports.

The Ministry of Trade and Industry has forecast that the trade-dependent economy, that grew healthily with 7.7 percent last year, may shrink due to the uncertainties of the global situation, although the economy is fairly robust as the last full year contraction was over 7 years ago.

Data released today reveal that the country’s economy has receded for two consecutive quarters, with gross domestic product contracting 0.6% in the third quarter compared to last year.

The nature of trade dependant economies such as Singapore do fluctuate with global trends.

Joseph Tan, the chief economist for Asia at Credit Suisse Private Banking, has aid that the government can do little to affect the external demand for their exports although pump-priming has been used in order to ignite the domestic market, explaining that there has been a degree of urgency in the implementation of such policies.

Finance Minister Tharman Shanmugaratnam said that the government will not stop spending even though the budget deficit in 2008 is three times its first estimate.

Electronic goods and pharmaceuticals exports have hit the country hard as the demand form the US, Europe and the emerging markets has cooled, with exports expected to fall by 7 percent in this year.

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