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Fears of a double dip recession in
Singapore
By Tony Sitathan
Tan Kim San sells kwetiau, spicy Chinese
noodles, at the intersection of two busy streets near
Chinatown in Singapore. He complains that he has fewer
customers visiting his stall compared to almost a year
ago. "I am used to seeing people waiting in line,
normally after their work day. Now it's just a handful
of people," he lamented. "Perhaps it's a good
measurement of the sorry state of the economy."
Although a vendor falling on bad times is hardly
a good barometer of economic conditions in Singapore,
the economic growth forecast for 2002 has been snipped
from 3-4 percent to a more realistic 2-2.5 percent. And
for 2003, growth has been forecast at a modest 2-5
percent. And that's not all.
Several economists
contacted by Asia Times Online maintain that Singapore
might hit a double dip recession due to the weakening of
the US economy, the possible military intervention in
Iraq, and a dismal global electronics sector that is
still depressed in the fourth quarter of 2002. Friedrich
Wu, the Ministry of Trade and Industry Director, warned
of more downside risks on the horizon. "At this time, we
do not rule out a double dip recession. However, we will
not rate it as a very high probability either," he said.
Andrew Taylor, an economist from Axiom
Consulting based in Hong Kong, countered: "In order to
cross over the boundary of the double dip recession,
which is a prolonged recession, Singapore has to
register a year on year growth of at least 3.8 percent
in the fourth quarter and grow modestly by around 2.5
percent onwards for the rest of 2003. It would be
difficult to predict based on the current global warming
of events in Iraq and the technical slowdown in the US."
Although Singapore's third quarter GDP nosedived
10.1 percent compared to the second quarter, which rose
13.4 percent, there is still reason for hope as the
overall economy registered a 3.9 percent growth in the
third quarter compared to last year. "However, all bets
are off, since Singapore's performance in the non-oil
domestic exports [NODX] fell 3.1 percent in October from
the previous month of US$5.04 billion, compared to its
sharp rise of 16.9 percent rise in September," said
Taylor.
More importantly during the third
quarter, unemployment levels soared from 4.1 to 4.8
percent, exceeding the peak 4.3 percent experienced
during the Asian financial crisis. "With unemployment
levels at an all time high, the government would be hard
pressed to find any easy solutions, especially for its
top heavy employees involved in the manufacturing
sector," maintained Andrew Ong, a human resources
executive working for a chemical company based in
Singapore.
According to Ong, Singapore's annual
salaries for manufacturing staff are almost twice those
of Malaysia and almost five times those in Vietnam.
"Singapore's competitiveness has been eroded as a
manufacturing center in Asia. Now we have to focus more
on value-added manufacturing and hi-tech manufacturing -
that means adapting to automation and robotics," he
said.
Although the manufacturing sector, which
contributes to about a quarter of Singapore's GDP, grew
almost 15 percent in the third quarter, this was due
more to the lower base last year when the country was in
recession.
And a Singapore that is very much
dependent on electronics has been paralyzed by the
global electronics slump. A report by Semiconductor
Equipment and Materials International recorded a
book-to-bill ratio of 0.84 percent by North
American-based makers of semiconductor equipment - a
figure that indicates a fall in overall demand. A
reading below 1.0 indicates poor demand for
semiconductor equipment as opposed to fulfilling new
orders that were received and billed. The manufacturing
sector contributed almost US$14.9 billion for the first
three quarters of this year compared to achieving almost
$18.6 billion for the whole of last year. Hence there is
still some hope that the final manufacturing figures for
2002 would surpass last year's annual figures.
According to an official from DBS Vickers
Securities, the chemicals industry is still seen
positively since it continued to surge ahead at 40
percent, despite a fall in overall chemical growth as
compared to the last quarter, while electronics
registered only a 15 percent expansion. "The chemical
sector together with the biomedical sector holds some
promise to a battered economy, but much of Singapore's
growth is still very much dependent on the overall
performance of the electronics sector," he said.
Tourism has been declining as well after the
Bali bombings. Singapore recorded a fall in arrivals by
almost 2.7 percent for this quarter. Its hotel and
restaurant business has fallen by almost 3.6 percent
compared to a fall of only 2.6 percent for 2001. "The
hospitality and tourism sector has been hard hit of late
and although there are greater travel discounts being
offered by travel companies and their affiliates, it
will be a while till visitors from Europe and the United
States flock back to Singapore," said Simone Tay, the
travel manager from travel agency EuroBel Travels.
Creating a positive image now is important not
just for Singapore but for the rest of Asia. Security
concerns and veiled terrorist threats will do much to
damage the image of small countries like Singapore.
Keeping its tourist dollars as well as foreign
investments locked into the country is a major concern
for Singapore. With the overall health of the economy at
stake, best not rock the boat or it will not just be bad
for vendors like Tan Kim San. And staying out of the
grip of a double dip recession is not going to be an
easy task either, given the choppiness of the waters
around the tiny island state.
(©2002 Asia Times
Online Co, Ltd. All rights reserved. Please contact content@atimes.com
for information on our sales and syndication
policies.)
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