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Recession tipped as Singapore exports fall-Channel NewsAsia
Posted: 17 September 2008 1434 hrs

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SINGAPORE – A decline in Singapore’s main exports for the fourth straight month has raised the risk of the region’s richest economy falling into a technical third-quarter recession, analysts said Wednesday.

The city-state’s non-oil domestic exports (NODX) in August fell 14 per cent from the same month last year as shipments for both electronics and non-electronics goods tumbled, the government said.

The August decline worsened from the 5.8 per cent dip in July and was bigger than an eight per cent shrinkage projected by a Dow Jones Newswires poll of analysts.

Singapore’s trade promotion agency, International Enterprise Singapore, said a slowing global economy hurt exports to its key markets such as the United States and Europe.

Release of the figures came after turbulence in global financial markets intensified with the collapse this week of Wall Street investment bank Lehman Brothers.

“This fourth straight month of export contraction will certainly weigh on the domestic manufacturing sector’s third-quarter 2008 growth outlook, and reaffirms our call for a manufacturing-led technical recession this year,” said Alvin Liew, an economist with Standard Chartered Bank.

“And with the Singapore economy highly dependent on external demand, economic prospects certainly look much poorer in the second half.”

Exports of electronics goods fell 19 per cent year-on-year in August, continuing a decline that began in February 2007, IE Singapore said.

The drop was “largely due to weaker sales of consumer electronics, integrated circuits, disk drives and telecommunications equipment,” it added.

Non-electronics exports also fell 9.6 per cent, led by pharmaceuticals which were down 45.2 per cent.

Shipments to nine of Singapore’s top 10 NODX markets shrank. The biggest contributors to the contraction came from the United States, the European Union and Malaysia, IE Singapore said.

On a month-on-month seasonally adjusted basis, NODX was up 2.0 per cent in August, compared with the 2.3 per cent decline in July.

Liew said Singapore’s full-year gross domestic product (GDP) growth is likely to come in at 3.5 percent, lower than the government’s official forecast of four to five per cent.

About 70 per cent of last year’s GDP growth was driven by external demand, Liew said.

“Given the weak numbers, the risk of a technical recession has increased,” said United Overseas Bank economist Hoe Woei Chen.

Manufacturing output data to be released later this month should give a better sense of that possibility, although the outlook is “not too optimistic,” she told AFP.

A technical recession is defined as two consecutive quarters of quarter-on-quarter contractions in the GDP, the total value of goods and services produced in a country.

On an annualised, quarter-on-quarter basis, Singapore’s GDP contracted six per cent in the June quarter from the previous three months.

Hoe said if GDP growth falls below one per cent in the September quarter from the previous year, Singapore is likely to go into a technical recession.

Singapore’s economic growth, measured on a year-on-year basis, slowed to an annual rate of 2.1 per cent in the second quarter, according to official data.

With poor manufacturing data likely for August, “the risk of Singapore registering another quarter of GDP contraction has increased,” said Song Seng Wun, a regional economist with CIMB-GK securities.

“And with year-end festive demand likely to be weakest since the Asian financial crisis, we may have to lower our 3.5 per cent GDP forecast for the fourth quarter and the full year,” he said.

- AFP/yb/ir