SINGAPORE on Friday cut its economic outlook for 2009 after reporting a worse-than-expected fourth quarter performance as manufacturing contracted and services sector slowed amid the global economic crisis.
The government said it now expects gross domestic product this year to come in between a decline of 2 per cent and growth of 1 per cent, lower than the previous forecast of -1 per cent to +2 per cent made in November.
The latest forecast comes as Singapore said its economy shrank for a third consecutive quarter, contracting at a seasonally adjusted, annualised pace of 12.5 per cent in the October to December period following a revised 5.4 per cent decline in July-September.
'There is further downside risk to the latest forecast. We do expect the first quarter to be far worse than fourth-quarter GDP,' said Citigroup economist Kit Wei Zheng.
'Manufacturing will contract further, I think it will be double-digits, while services will likely contract from here,' said Mr Kit, who added Singapore's first quarter GDP could shrink 6-8 per cent from a year ago.
Singapore's economy has contracted for three straight quarters as the global financial crisis pushed its major export markets, including the United States, Japan and the euro zone, into recession.
From a year ago, gross domestic product fell 2.6 per cent following a drop of 0.3 per cent in the third quarter, advance estimates from the Ministry of Trade and Industry (MTI) showed.
The economy grew 1.5 per cent for all of 2008, compared with 7.7 per cent in 2007.
Singapore last reported three straight quarters of economic contraction in 2001 when the city-state was hammered by the bursting of the dotcom bubble.
'The growth outlook for the regional economies has also deteriorated, with more economies now expected to register negative or flat growth next year,' the trade ministry said on Friday.
According to MTI, Singapore's manufacturing sector shrank 9 percent in the fourth quarter from a year ago, while construction grew 13.3 per cent and services rose 1.1 per cent.
'Manufacturing has definitely been hit very hard by weakness in electronics. We have to see how much of that will spill over to the services sector,' said Mr David Cohen of Action Economics.
'Tourist-related activities have seen some drag from the global slowdown.'
Prime Minister Lee Hsien Loong warned in his New Year message on Wednesday that the global financial crisis had hit the island hard and the economic outlook was uncertain.
'We must therefore prepare for a difficult year ahead, and especially the first half of 2009. Our economy will probably contract further,' he said.
Singapore reports advance GDP data based largely on information from the first two months of the quarter, and follows up with detailed GDP numbers for the period about five to six weeks later. -- THOMSON REUTERS