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SINGAPORE: Singapore's economic growth will be weak going into 2009 and its economy could bottom out in the third quarter, according to the World Bank. The city state is expected to be one of the worst-hit in the region, given its small and open economy.
The World Bank said East Asian economies will fare better than their Western counterparts in the months ahead as they are less exposed to the financial turmoil there.
These economies also have stronger current account balances and better balance sheets due to better government policies and supervision following the Asian financial crisis in the late 1990s.
The World Bank expects East Asia to grow by 5.3 per cent next year, although analysts said the growth pattern is not uniform across the region.
Joseph Tan, director, Asian chief economist, Credit Suisse, said: "If you look at numbers like these, typically it's a weighted average growth. Hence a lot is coming from China. If you take out China, the figures go down to 4 per cent. If you take out India, it goes even lower. I think a lot of countries in East Asia will struggle to get above 3 per cent growth for next year."
Analysts said the three most vulnerable economies are Hong Kong, Singapore and Malaysia due to their heavy dependence on trade.
Singapore's central bank eased its monetary policy in October to boost the economy. But analysts noted that the move may not be enough as a cheaper Sing dollar is unlikely to go far in boosting external demand for exports.
"In this environment, it's a lot better to ensure that liquidity conditions in Singapore remain flush. In other words, continue to keep interbank rates flush... One thing I'm particularly concerned about – not just in Singapore but globally – we do have very flush liquidity conditions, low interest rates, but banks are not lending," said Mr Tan.
He added that it is important to ensure that banks continue to lend, so that companies have sufficient funds to complete projects in Singapore.
- CNA/so
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