Japan, Hong Kong, Taiwan, New Zealand and Singapore are all very much in recession and starting to be concerned that conditions could get worse in 2009.
Japan slipped into a recession last week, Taiwan and Hong Kong also confirmed it and on Friday and Singapore went further, chopping the country’s 2008 growth rate estimate a fourth time and forecasting a possible further contraction next year.
Official figures said Singapore’s GDP contracted 0.6% year-on-year in the three months to September, compared with an initial estimate of a 0.5% fall.
A recession next year would be the fourth that Singapore has suffered since independence in 1965.
Growth this year will now be 2.5%, lower than an October forecast for 3% and less than a third of 2007’s rate.
"On an annualised quarter-on-quarter basis, growth declined by 6.8 per cent, compared to a fall of 5.3 per cent in the second quarter," the Trade Ministry said.
The country was the first into a recession in Asia proper and the trade ministry is now warning that it could contract by between 1% and 2% in 2009.
The Ministry said; “Considerable uncertainty remains as to how deep and long this downturn will last".
The government says it will bring forward its budget proposal by one month to January in an effort to increase public spending quickly to counter the downturn.
Because of its open and export dependent economy, Singapore is an indicator for economic trends in the rest of Asia.It is felling the US economic slump.
Manufacturing, which makes up a quarter of GDP, contracted by 11.4% in the third quarter from a year ago. That was after a 5.2% fall in the June quarter.
The Ministry said the mainstay electronics industry will continue to be affected by weak global semiconductor demand. (We’ve seen the Semi-Conducting Industry group forecast a fall in the production of chips next year for the first time in seven years as phone and personal computer sales fall.)
"The largest contraction came from the manufacturing sector, with the decline led by the electronics and biomedical sciences (BMS) segments.
"Falling external demand and the relocation of some electronics production to other countries contributed to the poor performance of electronics, while the BMS segment continues to be dampened by the production of pharmaceutical ingredients with lower values compared to a year ago.
"Growth in the services sector has started to moderate.”Services-producing industries grew by 5.3 per cent in the third quarter, compared to 7.1 per cent in the previous quarter.
"The plunge in stock markets worldwide since mid-September and disruptions in the global credit markets have started to affect many of the services and trade-related sectors, especially financial services, wholesale trade, and transport and storage.
"Economic growth in the developed economies has slowed down, with several countries already in recession. Consumer and business confidence indicators across the major economies are weak. The contraction in global demand has hit regional economies too.
"As a result, Singapore’s trade volumes and other indicators of regional demand, including visitor arrivals, have fallen.
"All these developments will further dampen Singapore’s economic growth in the remaining months of 2008."
The grim news is also behind the decision that senior managers in Temasek, the country’s main government investment fund (along with the GIC which has invested in Mirvac and GPT in Australia) will take a big pay cut.
Temasek and the GIC also invested in faltering banks like Merrill Lynch and Barclays.
Bloomberg said Temasek, which oversees $US130 billion, said senior management has volunteered to take a 15%- 25% pay cut. The key managers will provide almost 90% of the savings from the companywide cut.
Temasek has a controlling stake in six of Singapore’s 10 biggest publicly traded companies including Singapore Telecommunications and Singapore Airlines.
Temasek lost $A401 million in taking a 12% stake in the now failed ABC Learning. It built that to 14.6% and has lost it all.
The Singapore government last week said this week it plans to enhance measures to help companies secure loans and won’t cut spending, even if the budget deficit surges as expected.
The construction industry grew 12.8%, down from the annualised 19.8% rate in the June quarter.
But that won’t last as demand for new houses and units is falling and developers are delaying the introduction of new properties as prices fall.
