SINGAPORE’S export-driven economy grew a slim 0.4% in the fourth quarter of 2002, led by strong factory output which helped the city-state narrowly avoid recession.
But the government said yesterday the outlook was clouded by the prospect of a war in Iraq, a soft global electronics recovery and job losses at home.
Singapore’s unemployment rate may rise above 5.5% this year as manufacturers slash costs to confront lower-cost regional rivals and the government cuts payrolls to improve competitiveness in the large public sector.
Although the city-state looks set for a modest economic expansion in 2003 after escaping a double-dip recession last year, the pace hinges on demand for its high-tech exports and whether a Gulf war would disrupt trade and pile up more job losses.
The government said full-year 2002 growth came in at 2.2% and improving forward indicators put the city-state on track for a 2%to 5% expansion this year.
“Singapore escaped a technical recession by the skin of its nose,” said Song Seng Wun, economist at stockbroker G.K. Goh. “It was pretty much what we were looking for – a burst of growth in December led by manufacturing in the drugs sector.”
That trend appears to have continued at least into January, when factory output rose 9.7% from December, largely on strength in biomedical sciences, a sector policymakers hope will generate future revenue as low-cost Chinese manufacturers erode a traditional base of electronics production.
“If the economy continues to improve in 2003, we expect unemployment to ease to 4%,” Tan Leng Leng, director at the Ministry of Manpower, told a news conference.
“But downside risks prevail. If there is a fallout from the impact of an Iraq war, unemployment could go beyond 5.5%,” Tan said, adding that the jobless rate averaged 4.4% for 2002.
Singapore state-linked organisations have shed 1,600 jobs in the past four months alone.
The Ministry of Trade and Industry said it expected a soft recovery in the global electronics industry as consumer confidence in Singapore’s largest market for tech exports, the United States, continued to be weak.
Manufacturing, which makes up about a fourth of Singapore’s US$87bil, had been a big contributor to last year’s deep economic downturn and a major source of job losses.
“Going forward, growth will be fairly lumpy. The external sector will perform better with exports rising, but internally, we will continue to see unemployment rising and weaker corporate profits,” said Standard Chartered Bank economist Joseph Tan
The goods and producing industries fell a smaller 6.3% in the fourth quarter after contracting 16% in the third quarter on an annualised basis.
But the services producing sector showed small signs of a pick-up, rising 3.1% after shrinking 1%. The financial services sector saw two quarters of expansion, up 12.4% in the fourth quarter against 6.7% in the third, but remained down for the full year at minus 4.8%.
Singapore climbed out of its worst recession since 1964 in the second quarter of last year, but risked a double-dip recession after its economy shrank 6.6% on an annualised basis in the third quarter – a figure that was revised yesterday from a 10.1% contraction. – Reuters
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