Singapore may have seen worst of economic slowdown

Source : Channel NewsAsia – 4 May 2009

Singapore may have seen the worst of the economic slowdown and some economists believe the country’s economy could see mild recovery in the current quarter.

This comes after Prime Minister Lee Hsien Loong warned of a prolonged downturn and a tough year ahead in his May Day rally message last week.

Mr Lee said the optimistic scenario is for a U-shaped recovery, not a V-shaped one. He also cautioned that Singapore’s economy might stay at the bottom for a long time before slowly picking up again, with no growth or poor growth for several years to come.

Economists are uncertain if any rebound this quarter will be sustainable going forward, but they said growth this year is likely to fall within the government’s forecast of a 9 per cent contraction.
Song Seng Wun, regional economist, CIMB-GK Research, said: “The latest government forecast, where the worst-case scenario is a 9 per cent contraction for this year, probably takes in a scenario that this will be an L-shaped recovery. We may have seen the worst of the decline in output in the fourth quarter and the first quarter of this year, and going forward, things may be highly uncertain and could flatten out.

“We, ourselves, think that it’s probably somewhere in the middle – 7.5 per cent contraction for the year, where we could see a little bit of a rebound in the second quarter. We are seeing some recovery in orders and businesses are seeing a sense of pick-up. But they can’t really see beyond the next couple of months.”

If the recovery requires more time, they said it is unlikely to last beyond three years and they believe Singapore must begin preparing to capitalise on the recovery.

Irvin Seah, economist, DBS Bank, said: “While we try to stimulate growth in some of the existing industries and try to make them more competitive, we also have to put in a lot of effort into stimulating growth in new sectors through R&D and perhaps through incentives as well.
“But essentially, with the growth of new emerging sectors, we will have more pillars of growth; we will have more engines that would help to propel the economy forward.”