Singapore GDP may drop 10 per cent as global trade slumps
Posted on 16 April 2009 with no comments from readers
Only last month the founding father of the city state of Singapore, Lee Kuan Yew warned that GDP may drop by 10 per cent if exports continue on their downward path.
This is more pessimistic than the Ministry of Trade and Industry forecast of a six to nine per cent slump in GDP, a revision on the last forecast of two to five per cent. The slump in GDP would make the former tiger economy the worst performing Asian nation in 2009 for economic growth, say analysts.
Exports slump
Exports fell by 29 per cent in the first quarter, by contrast to the 20 and 50 per cent falls seen in China and Japan respectively. And indeed Singapore’s GDP is suffering from a sharp reduction in transit and re-export trade which makes the figures rather worse than is apparent in the real economy, particularly for jobs.
In last month’s trade figures economists pointed to a reduction in the rate of contraction as evidence that the economy might be bottoming out. The question then is how long the economy stays down.
The massive stimulus packages now being administered in China and Japan give some room for optimism that the worst of the downturn may be over. The Singapore government has also used its currency basket to effect a small devaluation.
The obvious parallel to Singapore in the Middle East is Dubai with its port and airport infrastructure handling the lion’s share of regional trade. But Dubai is a part of the wealthy UAE federation which dilutes the impact of declining trade flows on national GDP.
Dubai trade slows
Also Dubai port officials have stated that trade was down in the first quarter but not by more than single figures. The UAE is therefore probably the least affected country by the global trade slump.
What is still very worrying, however, is the sheer scale of the slump in global trade in the first quarter of 2009, with declines larger than those recorded in 1930, the opening months of the Great Depression.
Policy makers around the world have acted largely in unison to boost their economies by public spending and recapitalizing banks but it remains to be seen whether this proves sufficient to compensate for the slump in global business. The jury is still out.
