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SINGAPORE : Singapore's economy will see below-trend growth next year due to the continued impact of the global financial crisis and credit crunch, according to the Monetary Authority of Singapore (MAS).
The central bank said in its latest macroeconomic review, that Singapore's economy is likely to remain below its potential rate of 4-6 per cent growth over the next few quarters.
It added that prospects for a recovery in the latter half of 2009 will depend on the performance of the world's biggest economies and those in the region.
Singapore's stock market was one of the first in the country's financial sector to be hit by the global financial crisis.
Panic and spiralling confidence also hit other sentiment-driven segments such as wealth advisory, brokerage and treasury activities, as financial turmoil unfolded across the world.
The MAS said this was the first impact the wider global crisis had on the Singapore economy.
Consumer sentiment is likely to weaken next, and that will hurt sectors like retail and property.
Finally, flagging overseas demand will hit export-driven and tourism-related sectors.
The outlook for individual sectors within the economy is varied. The MAS said the property sector will likely witness a mixed performance going forward, with demand for construction and bank loans to the housing sector likely to fall.
However, architectural and engineering services should continue to be propped up by construction projects that were already locked in before the downturn.
The construction industry, meanwhile, is likely to stay fully stretched in 2009, said the MAS, as it is still digesting a sizeable backlog of projects that were awarded in previous quarters.
Retailers and restaurants, however, could see slower business during the year-end season and into 2009, if tourist traffic continues to slow.
But Singapore also has reason to cheer, according to economists.
"Singapore enjoys the benefit of a diversified economy and even in the manufacturing sector, some areas like production of offshore drilling platforms enjoys a big backlog. Similarly in construction, although property markets have been cooling off, there's still a backlog," said David Cohen, director of Asian Economic Forecasting at Action Economics.
The MAS also expects the biomedical sector to cushion the impact of a global downturn.
And there are also some positive effects from falling commodity prices.
"We are pretty certain that inflation won't be a major threat because the rate at which commodity and oil prices are receding is quite unbelievable. And also with global growth slowing down, real demand for commodities - not just speculative demand - is coming down significantly," said Assistant Professor Choy Keen Meng, School of Humanities and Social Sciences, NTU.
Beyond immediate cyclical stresses, Singapore also faces longer-term structural challenges where upgrading of worker skills will be essential as the economy shifts to higher value-added exports.
The MAS said advance estimates showed that the economy contracted 6.3 per cent in the third quarter after contracting 5.7 per cent in the previous quarter. - CNA /ls
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