More signs of dampening

Output, property results show weak global demand

MANUFACTURING and property data released yesterday provided further indication that weak global demand is hurting the Singapore economy.

While economists say they are cautiously optimistic, expecting the economy to continue to expand, some big research houses have started to scale down their economic forecasts for this year.

“The United States economy has deteriorated more than we previously expected.

“As a small and open economy, we do expect weakness in US economy to have a knock-on effect on the Singapore export market,” said Mr Tai Hui, regional head of economic research at Standard Chartered Bank, who lowered the bank’s forecast for Singapore growth for the whole year to 4.5 per cent from 5.7 per cent last week.

Prime Minister Lee Hsien Loong said this week that “it is entirely possible and likely that America will go into recession”.

However, he is confident Singapore will be “able to weather this storm” as policies aimed at restructuring the economy will provide buffers from the external slowdown. He maintained gross domestic product (GDP) will expand by 4.5 to 6.0 per cent this year.

According to the Economic Development Board (EDB), Singapore’s industrial production fell by 1.7 per cent from a year earlier in December, the second month that manufacturing output has contracted.

The Urban Redevelopment Authority (URA) affirmed earlier estimates for the fourth quarter, showing the rise in residential property prices moderated to 6.8 per cent from the third quarter’s 8.3 per cent, while the Housing Development Board (HDB) offered a similar prognosis for the public housing sector.

The HDB said prices of resale public flats grew by 5.7 per cent in the fourth quarter, slower than the third quarter’s 6.6 per cent.

In manufacturing, a hoped-for recovery in the pharmaceutical sector failed to merge, while electronics production stayed lacklustre.

“For pharmaceuticals, we’ve always had the odd slowing here and there, due to plants being closed for cleaning. But this was four consecutive figures of decline with almost all double-digit drops.

“This is a pretty drastic drop and could be a combination of a reflection of slowing global demand and pharmaceuticals coming off their lofty levels,” said Mr Vishnu Varathan, economist at research house Forecast Singapore.

Mr Hui said the biggest risk this year is the electronics cycle, adding that “most of the leading indicators are still suggesting a relatively soft period of growth and we have not seen any convincing figures of a rebound just yet”.

With the manufacturing sector a major source of jobs, the recent performance of the sector adds to a bleak picture for the economy, said OCBC economist Selena Ling.

The property market is similarly entering a slower phase.

“With the economy in such a flux, buying may shrink further this quarter,” said Mr Colin Tan, head of consultancy and research at Chesterton International. “Sellers from some speculative projects have already lowered their prices,” he added.

“It is increasingly likely that 2008 will not be able to mirror the performance of the previous year,” said Knight Frank property consultant Nicholas Mak.

He projects that transactions and price expansion will slow down as buyers become more discerning and prudent.

Source : Weekend Today -26 Jan 2008

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