MAJOR investment banks slashed growth forecasts for South-east Asian economies, with one predicting an 8 per cent contraction in Singapore, as the weakening global economy hits the region's key export industry.
Goldman Sachs now expects Singapore's gross domestic product to fall 8 per cent this year from a previous forecast for a 4 per cent contraction hurt also by a slowing real estate market and shrinking investment.
It also cut its GDP forecasts for 2009 for four other South-east Asian economies. Among them, its sharpest downward revision was for Malaysia to shrink 3.5 per cent from growth of 1.7 per cent previously, while it saw Thai GDP slipping 4 per cent from a 0.8 per cent drop previously.
Indonesia's economy was expected to grow at a slower pace of 2.5 per cent from 3.0 per cent previously, and the Philippine economy was expected to shrink 0.5 per cent from a growth forecast of 1.8 per cent previously, Goldman said in a note on Thursday.
'We reiterate our view that Singapore has one of the highest exposures to weakness in external demand, because of its high ratio of exports to GDP and the high portion of exports-driven domestic demand,' it said.
HSBC lowered growth forecasts for Singapore to -7 per cent and for Malaysia to -3.5 per cent, from -5 per cent and +0.5 per cent previously.
Credit Suisse saw a 6.5 per cent contraction for Singapore, a 5.2 per cent contraction for Japan as frozen trade hits exporters, but 8 per cent growth for China given its policy stimulus.
Goldman's forecast on Singapore is the most bearish among private economists, although Singapore's Minister Mentor Lee Kuan Yew told a Reuters seminar earlier this month the economy could contract by as much as 10 per cent in 2009 if exports continued to slide in the second quarter.
A poll of analysts by Reuters on Wednesday put the average forecast for Singapore at a 4.9 per cent contraction, in line with the government's official forecast and a survey of economists by the central bank.
Goldman saw the Singapore dollar at 1.64 to the US dollar within 3 months while HSBC expected a 2-3 per cent one-off shift downwards in the band, with scope to ease policy again. -- REUTERS