Singapore Growth to Slow Sharply Next Year
Singapore’s economic growth will slow sharply next year as U.S. and European demand for the island’s exports weakens, the government said Thursday, after reporting an expansion of nearly 11 percent for the third quarter.
Gross domestic product will likely expand between 4 percent and 6 percent in 2011, down from around 15 percent expected for this year, the Trade and Industry Ministry said in a statement.
The ministry warned that the U.S. economy could slip back into recession next year, while debt problems may continue to dog some European countries.
Singapore, with its small population and lack of natural resources, relies on manufacturing, financial services and tourism to drive economic growth. The city-state of 5 million people has benefited this year from a recovery in global demand for its exports and a surge in visitor arrivals.
The ministry said GDP rose 10.6 percent in the July-to-September quarter from a year earlier after surging 19.5 percent in the second quarter, which was the biggest jump since the government began publishing quarterly figures in 1975. The ministry’s preliminary report last month said the economy grew 10.3 percent in the third quarter.
Quarter to quarter the economy actually contracted, partly reflecting sharp swings in pharmaceutical production that have whipped around Singapore’s manufacturing numbers this year.
Industrial production fell an annualized 54 percent in the third quarter after surging 66 percent in the second and 200 percent in the first.
“Much of the extraordinary volatility reflects huge swings” in the pharmaceutical sector, said Robert Prior-Wandesforde, an economist with Credit Suisse. This instability “is fast becoming Singapore’s key weak spot,” he said.
At 15 percent, Singapore’s economic growth this year would be the highest in Asia and likely the world, Prior-Wandesforde said.
Singapore expects non-oil exports to grow between 6 percent and 8 percent next year, down from a jump of about 24 percent this year, the ministry said.
The central bank, known as the Monetary Authority of Singapore, has twice moved to strengthen the Singapore dollar this year in a bid to contain inflation, which it expects to reach 4 percent by the end of the year.
Strong economic growth next year could convince the MAS to allow a further strengthening of the currency, said Wei Zheng Kit, an economist with Citigroup.
Loose monetary policy will likely offset high jobless rates to keep developed countries growing slowly next year, the ministry said.
“The advanced economies will grow at a steady but relatively slow pace,” the ministry said. “The strength of recovery could be restrained by high unemployment and weak household balance sheets.”
ALEX KENNEDY, Associated Press SINGAPORE