Singapore economy shrinks for first time in 13 years
Singapore economy shrinks for first time in 13 years
SINGAPORE (AFP): Singapore's economy shrank by 1.5 percent in the third quarter of this year, its first quarterly contraction since the last recession in 1985, Prime Minister Goh Chok Tong announced Thursday.
He said Singapore was facing its "most severe test since independence" 33 years ago because of the regional financial crisis that had slammed the brakes on rapid economic growth and posed a plethora of problems for the city state.
Goh doubted predictions by some analysts and the International Monetary Fund (IMF) about a turnaround for the regional economies next year.
"It is still uncertain when the current economic storm will blow over. The IMF suggests that a turnaround for ailing Asian economies may be in sight next year. I am less sure," Goh told trade union leaders.
"With a slump in the region, and the (Asian economic) crisis now spreading to other parts of the world, we can expect Singapore's economic growth to remain weak for a couple of years," he said.
The government has forecast that economic growth will be between 0.5 percent and 1.5 percent this year compared with a strong 7.8 percent growth in 1997.
The island economy grew by only 1.6 percent in the second quarter of this year, down from 6.1 percent in the first quarter.
The last time the trade-driven economy registered negative growth was in 1985 when it contracted by 1.6 percent.
Goh said that the regional financial crisis had cut demand for Singaporean goods and services and forced down prices and reduced corporate earnings.
The problem was aggravated by a cyclical global downturn in some industries, including electronics, the lynchpin of Singapore's key manufacturing sector.
Goh said the government would take a three-pronged approach to help companies survive the harsh market conditions and save and create jobs.
"First, try to increase demand for our goods and services. Second, increase our national capabilities and upgrade our individual skills. Third, reduce the costs of our goods and services," he told the National Trades Union Congress (NTUC) delegates meeting.
The talks focused on how the NTUC should respond to the regional economic crisis, triggered by rapid currency devaluations since July last year, and its impact on workers.
High on the agenda is a resolution calling for "equitable sacrifices" by workers, the government and employers.
Union leaders have been warning that the number of retrenched workers in Singapore could reach 30,000 by the end of the year, compared to 20,000 jobs lost in the last recession. Workers have also been warned to brace for cuts in salaries and the employers' share of contribution to a state-run pension fund.
Goh told the meeting: "Our national priority now must be to minimize the number of people retrenched, find employment for the unemployed and retain workers for new jobs.
"This is the time for all Singaporeans to pull together."
Goh agreed with a growing perception that the costs of doing business in Singapore should be reduced sharply but warned that cutting wages alone was unwelcome as the prosperous city state's standard of living had to be adjusted.
He also ruled out cutting costs by depreciating the Singapore dollar to the level of its competitors as the move would be neutralized by high inflation and eventually lower real wages.
Goh said that Singapore came under close scrutiny by analysts, economists and investors who had given Singapore high marks for the management of the economy and its "rational" response to the regional crisis so far.
"Now, they are watching whether we have the political strength to trim costs to make Singapore competitive, and whether we have a sensible population," he said.