Singapore Economy Dips; Recession a Possibility
Singapore said Tuesday that its economy contracted in the second quarter, signaling it could become the first Southeast Asian nation to slip into a recession since the 1997-98 Asian economic crisis. Economists say the slowdown is spreading.
“We’re going to see a string of these, either extremely poor or negative numbers in the near future,” said Song Seng Wun, Singapore-based regional economist with G.K. Goh Research. “They’re all getting hammered.”
Singapore’s Ministry of Trade and Industry said the economy shrank by a seasonally adjusted 0.8% in the second quarter from a year earlier. Another quarter of negative growth in its gross domestic product would put it in a recession by conventional U.S. terms.
Singapore is the first country to report its second-quarter results. Thailand, Taiwan and the Philippines will follow in the next few weeks, and their economies also are likely to have contracted in the period, analysts say.
Singapore, a relatively wealthy city-state, has been among the hardest hit by the U.S. economic slowdown because foreign trade accounts for a far larger share of its GDP than is the case with other Southeast Asian nations.
Furthermore, a huge percentage of Singapore’s foreign trade and manufacturing involves electronic goods, which have seen retail demand fall off as consumer and corporate shoppers from Brentwood to Brazil grow more cautious.
As the slowdown has intensified throughout the region in the last three months it has also created an echo effect. Intel Corp.’s operations in Malaysia, for instance, may ship semiconductors to Singapore, where they are combined with locally produced disk drives for shipment back to Dell Computer Corp.’s factory in Malaysia.
“When it falls, we all fall together,” Song said.
Economists say there isn’t much the region can do at this stage other than wait and hope for a global upturn. This follows because these relatively small economies have little control over the buying habits of American, European and Japanese mall rats. And for many of these economies, there’s relatively little they can do to pick up the slack, given that local consumer demand accounts for a relatively small part of their economic picture.
Countries with a strong agricultural base, such as Thailand and the Philippines, can offset the trade losses with farm production. This year has brought good weather, which helps.
A limited amount of public-works spending also can help buffer the downturn.
But these areas aren’t enough to make up for the export losses.
Furthermore, the growing fear is that European economies also will weaken further in the near future on the heels of the U.S. slowdown. If that happens, Southeast Asian countries may have to wait a year or more before revving up their export engine again.
“For us down here, that may mean we just have to batten down the hatch and pray,” Song said.
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Sinking Fast
Singapore reports that it is the first Southeast Asian nation to fall into a recession since recovering from the last recession four years ago.
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Gross Domestic Product (Percent change from previous year)
QII 2001: -0.8%
Source: Ministry of Trade and Industry
