Singapore Likely Slipped Into Recession in Fourth Quarter

Shoppers in Singapore's main shopping district Orchard Road
Bloomberg | Getty Images
Shoppers in Singapore's main shopping district Orchard Road

Singapore likely joined Japan in recession in the fourth quarter of 2012, dragged down by weakness in its top exports of electronics, according to a Reuters poll of economists.

Gross domestic product (GDP) probably shrank by an annualized and seasonally adjusted 1.4 percent in October-December from the preceding three months, the median estimate of six economists showed.

The economy contracted 5.9 percent in the third quarter from April-June at a seasonally adjusted and annualized rate and so another quarter-on-quarter decline would meet the definition of a recession.

Singapore, whose trade is around three times GDP, has been badly hit by the weakness in Western economies that has crimped demand for many of its exports. The city-state's electronic manufacturers have also failed to tap surging demand for smart phones, unlike rivals such as South Korea and Taiwan.

For the first 11 months of 2012, electronics production fell 11.1 percent compared with the same period last year, underscoring the weakness in the export markets.

From a year ago, Singapore's economy probably expanded by 0.8 percent in the October-December period, bringing growth for the full year to around 1.1 percent, the poll showed.

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Third quarter GDP may itself be revised further downwards after the industrial production data for November released earlier this week showed downward revisions for previous months.

"November IP print, and the earlier revisions, suggest to us that Q4 has likely been a quarter of non-existent growth," said Barclays economist Joey Chew.

"Q3 GDP could be revised slightly lower now that IP is assessed to have shrunk 1.6 percent year-on-year instead of 0.9 percent year-on-year as earlier estimated," she added.

Other economists, however, expect Singapore to avoid a recession, pointing to Trade and Industry Minister Lim Hng Kiang's comment that full-year GDP growth will still be around 1.5 percent, despite a weak fourth quarter.

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Singapore is scheduled to report advance GDP estimates for the fourth quarter on Jan 2 but Prime Minister Lee Hsien Loong will likely provide some details in his New Year address on December 31.