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PREVIEW-UPDATE 1-Singapore Q3 GDP likely shrank but may dodge recession

(Adds new estimates, comments by Singapore PM)

* WHAT: Advance Q3 GDP data

* WHEN: 8:00 am (0000 GMT), Friday, Oct 12

* FORECAST: -1.0 pct q/q saar, +1.2 pct y/y

SINGAPORE, Oct 10 (Reuters) - Singapore's economy probably contracted in the third quarter due to weak global demand for its manufacturing exports, reinforcing expectations of policy easing by the central bank on Friday.

But the city-state may avoid becoming the first major Asian economy to fall into a technical recession this year as Prime Minister Lee Hsien Loong has said second-quarter data could be revised upwards.

Recessions are typically defined as two quarters of sequential decline in gross domestic product.

According to the median estimate of 16 economists polled by Reuters, Singapore's GDP likely shrank a seasonally adjusted and annualised 1. 0 p ercent qu arter-on-quarter in July-September, worsening from the 0.7 percent drop that had been reported for April-June.

From a year ago, the economy probably grew by 1.2 percent , slower than the second quarter's 2.0 percent expansion, reflecting the impact of the slowdown in the big export markets of Europe, United States and China on the trade-reliant city-state.

Advance estimates for third quarter GDP will be released at 8:00 a.m. local time (0000 GMT) on Friday, at the same time the Monetary Authority of Singapore (MAS), the city-state's central bank, issues its half-year monetary policy statement.

The central bank is expected to ease monetary policy by slowing the Singapore dollar's pace of appreciation to help manufacturers fight the weakness abroad. The local unit has gained 5.4 p e r cent this year, making the country's exports costlier.

Bank of America Merrill Lynch's Southeast Asian economist Chua Hak Bin said in a note that the downturn in Singapore appeared mild and was "largely a manufacturing recession".

Construction likely remained healthy in the third quarter while services growth was slightly positive, he added.

Chua told Reuters on Tuesday that he is sticking to his forecast that MAS will loosen monetary policy slightly.

Singapore's manufacturing sector contracted for a third consecutive month in September as new orders fell further, the country's Purchasing Managers' index (PMI) showed, in line with other export-driven Asian economies facing tepid demand in Europe and the United States.

The drop in the September PMI reading followed weak manufacturing and exports data for July and August that were worse than expected.

DOMESTIC FACTORS

DBS, Southeast Asia's largest banking group, said that domestic factors had added to Singapore's loss of competitiveness.

"High COE premiums and rentals, as well as the continued increase in labour cost are the key drivers," DBS economist Irvin Seah said in a note.

COEs refer to the certificates of entitlement that individuals and companies need to bid for before they can buy a motor vehicle in Singapore, and are used by authorities to cap the number of vehicles on the road.

According to COE prices tracked by sgcarmart.com, the cost of a certificate for goods vehicles and buses has jumped 45 percent since the start of the year to S$56,001 ($45,500), up from S$38,699 in early January.

Singapore has also been making it harder for companies to employ low-cost foreign workers as its previously lax immigration policy has caused wages at the low end to stagnate.

The government is also facing a backlash by citizens over the large number of foreigners in the country that has resulted in crowded trains and buses as well as competition for jobs and housing.

"The tightening in foreign labour inflow in particular, is creating significant strain on enterprises and eroding Singapore's cost competitiveness," Seah said.

Foreigners now account for 40 percent of the city-state's 5.3 million population.

Q3/2012 Median Range Q2/2012*** No. of (% change) (actual) estimates Q/Q SAAR* -1.0 -7.0/-0.3 -0.7 16 YOY** +1.2 -0.5/+2.0 +2.0 17

* Seasonally adjusted annualised rate based on quarterly change ** percentage change from a year ago *** numbers could be revised further

INDIVIDUAL ESTIMATES*: q/q saar y/y ANZ -0.9 1.2 Barclays -5.5 0.1 Bank of America Merrill Lynch -1.7 1.1 Capital Economics -0.5 1.0 CIMB -2.0 0.9 Citigroup -1.8 0.8 Credit Suisse -4.5 0.3 DBS -0.1 2.3 ING Financial Markets -3.5 0.6 Macquarie -7.0 -0.5 Maybank -1.0 1.5 Nomura -0.9 1.2 Oversea-Chinese Banking Corp -0.3 1.4 OSK DMG - 1.5 RBS -0.7 2.0 Standard Chartered -0.4 1.4 United Overseas Bank Ltd -0.4 1.2

* Most estimates were made before PM Lee said on Tuesday that Q2 GDP data would be revised further.

($1 = 1.2305 Singapore dollars)

(Reporting by Kevin Lim; Editing by Sanjeev Miglani & Kim Coghill)

((Kevin.Lim@thomsonreuters.com)(65)(6403 5663))

Keywords: SINGAPORE ECONOMY/GDP