S'pore's Q4 GDP shrinks 4.8%

Singapore's economy shrank by an annualised, seasonally adjusted rate of 4.8 per cent in the fourth quarter, worse-than-expected and the first quarterly contraction since 2003 as weak manufacturing dragged on growth, data showed on Thursday.

The figure was below an advance official estimate of a 3.2 per cent contraction. The estimate, issued in January, was based largely on data from October and November.

The Government also cut the forecasts for this year's economic growth. It said the economy will grow between 4-6 per cent, from a previous forecast of 4.5 to 6.5 per cent.

From a year earlier, Singapore's economy expanded by 5.4 per cent in the three months to the end of December, compared with an advance estimate of 6.0 per cent, and bringing growth for 2007 to 7.7 per cent.

Manufacturing expanded just 0.2 per cent in the fourth quarter from a year earlier, while construction grew 24.3 per cent. The financial services sector grew 15.9 per cent.

Inflation forecast raised
Singapore raised its inflation forecast for 2008 to 4.5 to 6.5 per cent on Wednesday, from a previous forecast of 3.5-4.5 per cent.

'Inflation should get worse before it gets better,' said Ravi Menon, second permanent secretary of the Trade Ministry, adding it was expected to peak in the first half of the year and moderate in the second half.

The central bank ruled out tightening monetary policy. 'Current conditions suggest that the US will likely enter a mild recession in the first half,' the Ministry of Trade and Industry said in a statement. 'The key uncertainty is over the length and severity of this slowdown.'

However, Singapore does not itself expect to sink into recession, defined as two consecutive quarterly declines in GDP, as it thinks Asian economies will remain relatively robust.

'Most of the simulations we have done do not show that outcome,' said Mr Menon.

Sing dollar slips
The Singapore dollar hit a one-week low on Thursday after data showed a steep contraction in the economy, while the Chinese yuan rebounded after falling sharply in post-holiday trade the previous day.

The Singapore dollar fell as far as 1.4215 per US dollar, down a third of a per cent from late Asian trade on Wednesday, as data showed the economy shrank by an annualised, seasonally adjusted 4.8 per cent in the fourth quarter.