U.S., world business
Singapore first in Asia to report recession
Associated Press
SINGAPORE — Singapore authorities released economic data yesterday indicating the wealthy city-state is the first Southeast Asian nation to fall into a recession since recovering from the 1997-98 Asian economic crisis.
The Singapore dollar fell to an 11-year low when the news was released, and the government downgraded its growth estimates for the year.
The Ministry of Trade and Industry reported the economy shrank a seasonally adjusted 0.8 percent in the second quarter from a year earlier, well below analysts median expectations of a 1.4 percent expansion.
On an annualized basis, Singapore's gross domestic product — a key indicator of economic growth — contracted by 10.1 percent in the second quarter of 2001 compared to the first quarter of the year, the government estimated.
First-quarter growth shrank by 11.3 percent compared with the fourth quarter of 2000. Conventionally, a recession is defined as two back-to-back quarters of gross domestic product contraction.
Singapore is the first Southeast Asian nation to officially report a recession mainly because it is the first to release second quarter data, said Adrian Foster, a regional economist with Nomura Securities in Singapore.
He said it is a "safe bet" that other nations will follow suit as their data is released.
Other Asian economies to contract in the first quarter of 2001 include Thailand, Taiwan and the Philippines, Foster said. But, he said, the economies of India, Malaysia and Hong Kong did not shrink.
Singapore's government believes the economy is unlikely to pick up soon. In a statement issued with the figures, the Ministry of Trade and Industry said, "growth will remain weak in the third quarter, with a slow recovery expected in the fourth quarter."
The government lowered its economic growth estimates for 2001 to between 0.5 percent to 1.5 percent, down from the already revised 3.5 percent to 5.5 percent. At the beginning of the year, it estimated the island state's economy would grow about 5 percent to 7 percent in 2001 following 9.9 percent growth in 2000.
Singapore is a wealthy Southeast Asian city-state of 4 million people. Its economy depends largely on the production and export of semiconductors and wafers used in the electronics industry.
The recession is a result of the cyclical slowdown and not because Singapore has become less competitive, Lee said.
"I don't think our competitiveness is a problem. Our exchange rate has been quite stable on a trade-weighted basis," said Lee. "Our wages have not shot up dramatically. They have been quite stable too."
Cindy Hauser, an economist with the Asian Development Bank, said she did not believe the new data revealed a "regional crisis."
"Singapore is a small, wide open economy heavily dependent on its export markets," she said. Singapore "boomed heavily in the previous two years and what we're seeing is an adjustment in the other direction."
