SINGAPORE, Nov 21 (Reuters) - Singapore's economy is seen
growing around 2.5 percent this year and could shrink next
year, as financial services and its exports are expected to be
hit by a weaker global economy, the government said on Friday.
Singapore's gross domestic product shrank a
worse-than-forecast 6.8 percent in the third quarter on a
seasonally adjusted annualised basis, final data showed,
confirming the country entered into a recession.
The government forecast the economy could slow to between
minus one percent and plus two percent growth next year,
sharply down from a previous forecast of below 4-6 percent
growth. It previously saw 2008 growth at 3 percent.
Singapore's central bank said after the data that its
monetary policy stance as announced last month was still
appropriate and that it had no plans for a change in policy
ahead of the next scheduled review in April.
"The figures were not unexpected as this is a realistic
expectation of a shrink in GDP next year," said Kit Wei Zheng
at Citigroup. "We think expectations of an imminent change to
monetary policy is still somewhat premature."
Singapore's central bank said last month it was shifting to
a zero appreciation or neutral bias for its currency from a
policy that allowed for gradual appreciation. The move is
intended to halt the rise of the currency, loosening monetary
conditions.
The Singapore dollar, the central bank's main monetary
policy tool, strengthened slightly versus the U.S. dollar to
1.5292 versus 1.5321 before the data.
Economists had expected the figures to confirm a previous
government flash estimate of a 6.3 percent contraction. Eight
economists forecast a median 2.25 increase for full year
growth.
Singapore was the first country in Asia to fall into a
recession, often defined as two consecutive quarters of
economic contractions, with Japan and Hong Kong having
followed.
Singapore's heavy dependence on trade, with non-oil
domestic exports contributing about 70 percent of the
$165-billion economy last year, makes it a good gauge of how
the global slowdown is affecting Asia.
"The data from everywhere else has been getting worse, the
picture from Japan, Taiwan and the U.S. has shown deterioration
in recent data. Today's revision was pretty modest," said David
Cohen of Action Economics.
"You could see them remaining patient. But the current
global weakening is significant enough to motivate a special
move in monetary policy."
Singapore's government is expected to spend more to shield
the country from the global downturn, which could swell its
budget deficit to be three times larger than forecast in the
current fiscal year, the finance minister said this week.
It would be funded from a S$6.4 billion ($4.2 billion)
surplus accumulated in the fiscal year that ended last March.
Economists said that personal and corporate income tax cuts
may also be on the cards for next year's budget, which has been
brought forward a month to January.
(Additional reporting by Saeed Azhar and Matthew Webster;
Editing by Jan Dahinten)
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