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SINGAPORE: Economists remain mixed on whether a technical recession is on the cards for Singapore, ahead of the government's third quarter gross domestic product flash estimate to be released on Friday.
While most economists believe a technical recession is likely to happen, others think the country will escape by a thin margin.
All signs point to a manufacturing-led slowdown for Singapore, as the credit crunch depresses demand from the country's key export markets - the US and Europe.
An economist from Standard Chartered, Alvin Liew, said: "It's going to be a manufacturing-led technical recession. Manufacturing has done poorly for first two months of the quarter itself.
"Even if we factor in a slight recovery in September, which we highly doubt, it is still close to maybe a double-digit contraction in manufacturing."
Economist from DBS Group Research, Irvin Seah, said: "We have weak manufacturing growth in July and August. Industrial production index dipped by 21.5 per cent in July. That's the sharpest decline since the manufacturing recession in 2001.
"On average, the manufacturing sector has dipped by about 17 per cent for July and August. Overall, you'll probably see a broad-based slowdown in Singapore economy in the third quarter, with the main drag coming from manufacturing sector."
However, whether this will lead to a technical recession or not is a matter of opinion.
A technical recession is two consecutive quarters of quarter-on-quarter contraction. In the second quarter, Singapore's economy had shrunk by six per cent.
Liew said: "We are looking for a technical recession. (For) third quarter numbers on sequential basis, we are looking at contraction of probably around five to six per cent. Year-on-year, it'll probably avoid contracting, so we'll come in at (a) low 0.4 per cent year-on-year in the third quarter."
Standard Chartered is expecting a two per cent contraction on a seasonally adjusted annualised basis, quarter-on-quarter.
On the other side of the fence is HSBC, which expects a two per cent growth on a quarter-on-quarter seasonally adjusted annualised basis in the third quarter.
Over the weekend, Singapore's Finance Minister said Singapore will see a slowdown that could last several quarters due to the global economic crisis. The government had earlier warned that Singapore's economic growth could dip below four per cent this year compared to the 7.7 per cent growth in 2007.
But economists say there is reason to stay positive.
Liew said: "Singapore has diversified the economy, so we are still going to be affected because we are a trade-oriented economy in Southeast Asia, as compared to Indonesia, but we're probably likely to ride this out, recovery (is) likely to come not in 2009, but more likely (in) 2010."
This would be led by electronics, which should see a turnaround in demand at the end of 2009. Pharmaceuticals is also expected to rebound sharply within 2009.
- CNA/yt
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