Singaporean economy contracts 1.5% this year
Singapore's GDP this will likely grow only 1.5% or less, after the economy did a weaker performance than previously expected in Q3. Despite the economy's slowdown in the July to September period, the country has narrowly avoided a technical recession -two consecutive quarters of economic contraction.
The Ministry of Trade and Industry (MTI) said that the growth - which dropped to the bottom range of its prior forecast of 1.5 to 2.5%- may even slip under 1.5% if weakness in the externally-oriented sectors continues in the current quarter.
Declining exports to Europe, the US and China have slowed down Asian countries' economic growth. A weaker demand from those key markets has slowed down manufacturing in recent months and, consequently, shaken up Singapore's economy, which is heavily dependent on export.
The government was expected by many analysts to loosen monetary policy and weaken the Singaporean dollar, as a strong currency makes exports more expensive overseas. As a result, the profits earned by exporters are cut down.
Nonetheless, the Monetary Authority of Singapore (MAS) said it would uphold its policy of allowing a slight and steady appreciation of the currency.
"I am a bit surprised that MAS chose to maintain, given signs that global growth momentum has lost steam and many other central banks have chosen to ease," said Song Sen Wun, economist at CIMB in Singapore. The fact that we averted a technical recession and the worry about the impact of the tight labour market probably kept them from easing."
The Ministry of Trade and Industry added that Singapore was still on its way to reach the target growth of between 1.5% and 2.5% for 2012.