Singapore recession likely bottomed

The country's economy could shrink as much as 9 percent this year as a “deep and prolonged” global downturn batters sales abroad, which account for about 60 percent of gross domestic product, the Monetary Authority of Singapore said in a semiannual report.

“The most intense phase of contraction of overall GDP has probably occurred,” the bank said. “The subsequent recovery of the economy from the trough is likely to be slow and gradual.”

Reliance on outward-looking industries such as trade, finance and tourism have left Singapore vulnerable to the brunt of the worst global slowdown in decades. The economy contracted 11.5 percent in the first quarter from a year earlier, the biggest drop since independence from Malaysia in 1965.

The bank also warned that a possible spread of swine flu, which is suspected in more than 150 deaths in Mexico, could further exacerbate the contraction. In 2003, an outbreak of the SARS virus killed 33 people in Singapore, devastated tourism and triggered a recession.

“Depending on how the global outbreak of swine influenza epidemic develops, there could be repercussions for the domestic economy,” the bank said. “The recent outbreak of swine influenza had added a new dimension to the risks for GDP prospects in the months ahead.”

The unemployment rate, which rose to 2.6 percent in the fourth quarter, will likely jump higher this year, while consumer prices will drop as much as 1 percent in 2009, the abank said.

The bank said manufacturing, which fell 26 percent in the first quarter, could stay depressed for some time unless consumer demand in developed economies, especially the U.S., recovers stronger than expected.

“Weak global industry demand and structural strains could further weigh down the domestic manufacturing sector, causing it to settle at a much lower level of production than in the pre-crisis period,” the bank said.

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