Singapore Sees 2012 Growth at Low End of Forecast on Exports
Singapore said growth this year will be at the lower end of its previous forecast and the expansion in 2013 may hold near a three-year low, as faltering demand for its goods weighs on the Southeast Asian nation’s economy.
The economy will grow 1 percent to 3 percent in 2013 after expanding about 1.5 percent this year, the Trade Ministry said in a statement today. It had previously forecast growth of as much as 2.5 percent in 2012. Gross domestic product contracted 5.9 percent last quarter from the previous three months, worse than the 1.5 percent decline estimated earlier.
The Singapore dollar and stocks fell as the trade ministry said today the global economy will remain “sluggish” and the island’s growth may be lower than predicted next year if an escalation in Europe’s sovereign debt crisis and fiscal cutbacks in the U.S. materialize. In contrast, South Korea’s central bank predicted this week the country may “bounce back” with stronger growth in 2013 while the Asian Development Bank expects expansion in most of the region to improve.
“Visibility is extremely poor,” said Kit Wei Zheng, a Singapore-based economist at Citigroup Inc. “You cannot depend on domestic demand to offset the drag from the external sector whereas most of the other Asian economies arguably can. Singapore is more exposed to what’s happening in developed countries.”
Non-oil domestic exports will probably rise 2 percent to 3 percent in 2012, lower than a previous forecast for shipments to grow 4 percent to 5 percent, the trade promotion agency said in a separate statement. It predicts overseas shipments will climb 2 percent to 4 percent in 2013.
The $240 billion economy expanded 0.3 percent last quarter from a year earlier, today’s report showed.
Singapore, located at the southern end of the 600-mile (965-kilometer) Malacca Strait and home to one of the world’s busiest container ports, has remained vulnerable to fluctuations in overseas demand for manufactured goods even as the government boosts the financial services and tourism industries to reduce reliance on exports.
The island’s dollar slid 0.3 percent to S$1.2276 against its U.S. counterpart at 10:42 a.m. local time. It has risen more than 5 percent this year, the third-best performer among Asia’s 11 most-traded currencies tracked by Bloomberg, after the central bank refrained from easing policy in 2012. The benchmark Straits Times Index of stocks fell 0.2 percent.
“It’s a downbeat view for 2013 and not much of an improvement from this year,” said Euben Paracuelles, a Singapore-based economist at Nomura Holdings Inc. “The external risks remain the key concern for Singapore officials and a lot hinges on the policy responses of the advanced economies. Until we get a resolution, investment will take a hit as well.”
The Monetary Authority of Singapore, which uses its exchange rate to manage inflation, unexpectedly held off from slowing the currency’s appreciation in October even after the economy contracted last quarter. The policy stance remains “appropriate,” central bank Deputy Managing Director Ong Chong Tee said in a briefing in the city today.
Policy actions have differed among Asian economies as some contend with persistent price pressures, while others seek to bolster growth. Thailand and the Philippines lowered interest rates at their most recent meetings, while Indonesia and Malaysia have kept their benchmarks unchanged.
Singapore said in October it will maintain a modest and gradual appreciation of its currency. The country guides the local dollar against a basket of currencies within an undisclosed band and adjusts the pace of appreciation or depreciation by changing the slope, width and center of the band. The stance is reviewed every April and October.
Consumer price gains will average more than 4.5 percent in 2012 and will be in a 3.5 percent-to-4.5 percent range next year, the central bank predicted last month. Rising costs of car permits, higher housing rentals and a labor market that is near full employment have kept price pressures elevated in the city of 5.3 million people, even as the central bank has said an appreciating currency will keep imported inflation benign.
“MAS is also alert to the risk that inflationary expectations will build up,” Finance Minister Tharman Shanmugaratnam said in a written reply to parliament this week, predicting upward price pressures in 2013. The central bank’s monetary policy stance “has been carefully calibrated to guard against an increase in inflation expectations.”
Manufacturing shrank 0.8 percent from a year earlier in the three months ended Sept. 30. The services industry grew 0.3 percent last quarter from a year earlier, while construction expanded 7.7 percent.
Genting Singapore Plc (GENS) and Las Vegas Sands Corp. have reported the lowest gaming revenue in at least 18 months at their Singapore casinos amid a slowdown in the economy and tighter rules by the industry’s regulator.
Singapore’s expansion will remain subdued for the rest of the year and electronics manufacturing will be affected by “tepid external demand,” the Trade Ministry said today. Economic growth this year may be less than 1.5 percent if “weakness in the externally-oriented sectors persists into the final quarter of 2012,” it said.
While the island’s exports rose 7.9 percent in October from a year earlier, rebounding from a revised 3.6 percent drop the previous month, electronics shipments fell 0.8 percent in a third month of declines. The trade figures were released after the GDP report, and showed overseas sales rising more than the 3.1 percent median estimate in a Bloomberg News survey.
The European Union’s statistics office said yesterday the euro-area economy succumbed to a recession for the second time in four years, as governments imposed tougher budget cuts and leaders struggled to contain the debt turmoil. European finance ministers this week agreed to grant Greece more time to wrestle down its budget deficit, the latest compromise to keep the country in the single currency and prevent a renewed flare-up of the crisis.
In the U.S., lawmakers have yet to resolve the so-called fiscal cliff, a combined $607 billion in automatic spending cuts and tax increases set to take effect in January. The Congressional Budget Office said that failure to address the issue could nudge the economy into a recession.
“The global economic outlook is still clouded with uncertainties,” the Singapore government said today.
To contact the editor responsible for this story: Stephanie Phang at email@example.com