Nov. 25 (Bloomberg) -- Singapore Prime Minister Lee Hsien Loong’s pay will fall 19 percent to S$3.04 million ($2 million) next year as the government slashes civil-servant wages in response to the deepening global financial crisis.

Wages of new ministers will fall 18 percent to S$1.57 million next year, and members of parliament will receive S$190,000, a 16 percent reduction, the government said in a statement late yesterday.

Singapore last week cut its growth forecast for a fourth time this year and said the economy may contract in 2009, prompting policy makers to implement more measures to avoid a prolonged slowdown. Temasek Holdings Pte, Singapore’s $130 billion investment company, said this week that senior managers volunteered to take pay cuts of as much as 25 percent, warning that the global recession may extend beyond 2009.

“The economy is not going to perform so well so maybe they feel their compensation should reflect that,” David Cohen, an economist at Action Economics, said today by phone. “They’re not immune to the belt-tightening that’s going to confront the domestic and global economy.”

Singapore’s first Prime Minister Lee Kuan Yew has often defended civil-servant salaries, arguing in his autobiography “From Third World to First” that “underpaid ministers and public officials have ruined many governments in Asia.”

The pay of cabinet ministers and top civil servants in Singapore have been pegged to the taxed income of the biggest earners in six private-sector professions since 1994, according to the government’s statement.

Highest Paid Leader

U.S. President George W. Bush and his wife reported taxable income of $719,274 in 2007, which included salary he earned as president and investment income from trusts that hold their assets, according to the White House. Hong Kong Chief Executive Donald Tsang receives HK$334,758 a month, or the equivalent of $518,000 a year, the Straits Times newspaper reported in June.

Temasek, owned by the Singapore Finance Ministry, said last week that senior management volunteered to take a 15 percent to 25 percent pay cut. Temasek is led by Chief Executive Officer Ho Ching, wife of Prime Minister Lee.

Government of Singapore Investment Corp., which oversees more than $100 billion of the city state’s reserves, declined to say whether it would cut salaries. Salaries at GIC “are pegged to industry benchmarks,” the company said today in an e-mailed response to questions.

Economy to Contract

Singapore’s economy will expand 2.5 percent in 2008, lower than an October forecast for 3 percent growth and less than a third of 2007’s pace, the trade ministry said on Nov. 21. The economy, already in recession, may shrink by as much as 1 percent next year, the first time since 2001.

Asian policy makers and their counterparts around the world have lowered interest rates and announced stimulus plans to counter the impact of the global financial crisis. Singapore will announce its next budget on Jan. 22, a month earlier than planned, as Lee warned the economy may experience several years of slow growth.

“The data has shown deterioration, with likelihood that things are going to weaken further from what we’ve heard from around the world,” Action Economics’ Cohen said. “You can say that Singapore officials are showing that they’ll feel some of the pain.”

To contact the reporter on this story: Jean Chua in Singapore at jchua4@bloomberg.net.

Last Updated: November 25, 2008 00:35 EST