Risk of Singapore slowdown rises as export demand falls

22 December 2011
Millet Enriquez emelita@mediacorp.com.sg

SINGAPORE - Economists are forecasting a difficult year for Singapore in 2012 as it faces the brunt of a slowdown in export demand.

"Our prognosis is for the Singapore economy to actually bottom out in the second quarter of next year," said Mr Kelvin Tay, chief investment strategist at UBS Wealth Management.

"The global slowdown that we saw, in the PMIs (Purchasing Managers Index) lately, will be felt more sharply in the first and second quarters of next year."

Singapore's economy is forecast to grow by more than 5 per cent this year. But things could get rougher next year, with economists projecting slower growth at between 2 and 3.5 per cent - slightly higher than the Government's forecast of 1 to 3 per cent.

"We are looking at Singapore perhaps being the most vulnerable country of the ASEAN countries over the next 12 months," said Mr Song Seng Wun, regional economist at CIMB Research.

In particular, analysts say small businesses and ordinary Singaporeans must brace themselves for tighter credit and labour markets.

Manufacturing and trade will take a hit, while financial services and real estate will pull back as risk activities are curtailed.

"We haven't pencilled in a technical recession in the first quarter of next year. But of course, depending on how the whole European situation goes, we cannot fully discount a risk of that happening in the first half of next year," said Ms Selena Ling, head of treasury research & strategy at OCBC Bank.