Singapore: The city-state's economy unexpectedly contracted for the first time in 4 & 1/2 years as factory output slowed, suggesting Asia's export-dependent markets may face increased risks from weaker global growth.
The republic's burgeoning construction industry prevented a wider contraction in the economy last quarter. - Bloomberg
Gross domestic product shrank an annualised 3.2% in the final quarter after adjusting for inflation, from a revised 4.4% expansion in the previous three-month period, the trade ministry said yesterday. Economists had expected a 3.1% gain.
"We definitely should expect to see more softness in exports in the next couple of quarters, and that's bad news for electronics-heavy Asian economies," said Kit Wei Zheng, an economist at Citigroup Inc in Singapore. "That means slower growth for Singapore and the rest of Asia."
Asia is twice as reliant on exports as the rest of the world, with 60% of overseas sales ultimately destined for the United States, Europe and Japan.
Singapore's manufacturing climbed 0.5% in the final three months of 2007 from a year earlier, the smallest increase in 18 quarters.
Output growth slowed from a revised 10.3% in the July-September period.
From a year earlier, the republic's economy grew 6% in the fourth quarter after gaining a revised 9% in the previous three months. Economists were expecting 7.7% growth.
The services industry climbed 8.3% from a year earlier, matching the growth rate of the previous three-month period.
Economists said demand for financial services probably eased as the rout in global credit markets increased risk aversion and the city-state's government implemented measures to cool the property market.
"Singapore's financial services industry has been affected by the shadow of the subprime problem," said Irvin Seah, an economist at DBS Group Holdings Ltd in Singapore. "Investors are more cautious and that has slowed down activity."
The republic's burgeoning construction industry prevented a wider contraction in the economy last quarter as companies such as Exxon Mobil Corp set up new plants and property developers built new office towers and condominiums.
Construction surged 24.4% from a year earlier, after a revised 19.2% gain in the three months ended September.
The economy advanced 7.5% in 2007, easing from a 7.9% rate of expansion the year before. The government expects growth to be between 4.5% and 6.5% in 2008.
By Bloomberg
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