SINGAPORE, Jan. 2 (UPI) — Figures released Thursday by the Ministry of Trade and Industry show that the economy narrowly escaped a technical recession in the fourth quarter of 2002. Gross domestic product expanded 0.1 percent on a quarterly basis, vs. a 9.9 percent contraction the previous period.
A technical recession is defined as two consecutive quarters of economic contraction.
According to the MTI figures, GDP grew an annual 2.6 percent in the fourth quarter, vs. 3.8 percent in the third quarter. For the full year, growth was 2.2 percent, vs. a 2 percent fall in 2001.
Some of the figures are estimates based largely on data from October and November, and a new set of estimates based on the entire fourth quarter will be released in February.
Economists said there had been a close call with a technical recession and the final full-year figure could still come in below 2.2 percent.
They noted that the MTI estimated fourth-quarter manufacturing sector growth at 6.7 percent on an annual basis, but the published data for October and November showed the sector had only grown by 5.5 percent.
“It seems that (the) MTI decided to guesstimate December manufacturing output. Without this advance estimate of December manufacturing output, Singapore would have registered a contraction in the fourth quarter,” pointed GK Goh analyst Song Seng Wun.
According to the MTI data, the manufacturing sector grew 7.5 percent in 2002, vs. an 11.5 percent contraction the previous year, while services expanded by 1.5 per cent, after rising 1.6 percent in 2001.
The construction sector continued to deteriorate, contracting 10 percent last year after a 2.1 percent contraction in 2001.
In his New Year’s address, Singapore Prime Minister Goh Chok Tong forecast growth of 2 percent to 5 percent for this year.
However, the Monetary Authority of Singapore warned Monday that the economic outlook had become “less favorable since mid-2002” as the external environment had deteriorated and that economic growth was “likely to be sluggish in the next quarter or so.”
MAS said in a statement: “Looking ahead, the potential conflict in Iraq poses near-term downside risks to growth. We expect the Singapore economy to remain sluggish in the first half of 2003, before staging a more balanced and firmly grounded recovery in the second half of this year, as the external environment improves and the global electronics industry strengthens.
The MAS also reaffirmed its neutral monetary policy stance.
Economists likewise pointed to uncertainties related to the Middle East and the U.S. economy.
DBS analyst Kaan Quan Hon believes that the underlying economic momentum will stay weak for at least another six months, although the domestic economy could improve in the second half on the back of the recent bottoming in the United States and recent global electronics numbers.
“The recent trade and manufacturing numbers show pockets of resilience, suggesting that the underlying domestic economic momentum should not decelerate sharply, especially if the recent bottoming in the U.S. economic data were to be sustained,” Kaan noted.
Kaan believes GDP growth of about 4 percent could be achieved this year. Song agreed, forecasting growth at 3.5 percent to 4 percent, with the bulk of the recovery coming in “towards the second half.”
Song said: “Although recent economic data released in the major OECD countries pointed to relatively weak consumer demand and depressed business activity, our key assumption is that the U.S. economy will continue growing in the first half of this year, albeit at a subpar growth mode rather than falling into a double-dip recession.
“For Singapore, the end of uncertainty in the first half of the year will release some pent-up demand and this will translate into a stronger economic recovery into the second half, which will gradually build up momentum for a more robust economy in 2004,” Song added.