SINGAPORE, Dec 31 (Reuters): Singapore’s economy grew by 1.2% in 2012, Prime Minister Lee Hsien Loong said on Monday, indicating the city-state slipped into a recession in the last three months of the year.
Credit Suisse economist Michael Wan, in a note to clients, estimated that 1.2% growth for the year implies the economy “contracted sequentially by 2% quarter-on-quarter annualised in the fourth quarter.”
“Following the minus 5.9% quarter-on-quarter seasonally adjusted and annualised rate in the previous quarter, we think that the economy has likely entered a technical recession,” Wan added. His estimates assumed no revisions to data for the first three quarters.
Singapore, whose trade is around three times GDP, has been badly hit by the weakness in Western economies that has crimped demand for many of its exports. The city-state’s electronic manufacturers have also failed to tap surging demand for smart phones, unlike rivals in South Korea and Taiwan.
For the first 11 months of 2012, electronics production fell 11.1% compared with the same period last year, underscoring the weakness in the export markets, according to industrial production data released last week.
Lee, in his New Year message, said “Growth was slower this year, at 1.2%. The weak U.S., European and Japanese economies dampened our growth, but some industries have also had difficulty hiring the workers they need to grow.”
Looking ahead, the Singapore prime minister said the economy will likely expand by 1-3% in 2013, reiterating an earlier government forecast.
“In our new phase, we must expect slower growth than we have become accustomed to,” Lee added, referring to government efforts to raise productivity rather than rely on low-cost foreign workers to boost economic activity.
Singapore’s economy grew by 4.9% in 2011 and the government’s latest forecast for 2012, just made in November, had been for expansion of around 1.5%. The 1.2% growth cited by Lee was, however, slightly higher than the 1.1% estimate of most economists in a Reuters poll.
Credit Suisse’s Wan said the government measures to make it harder for firms to hire cheap labour from abroad will crimp Singapore’s economic performance in the near term.
“We expect less productive companies to start to get weeded out in 2013 as restructuring bites... Businesses that have not made the necessary adjustments to survive in the island-state’s high-cost environment will choose to relocate, or throw in the towel completely,” he said.
The Straits Times newspaper reported earlier on Monday that some retailers in the city-state have complained of poor December sales, with revenue rising by just 5% despite deep discounts and a boom in visitor arrivals.
Rising rents and the strong Singapore dollar have made the city-state more expensive, and people are doing more of their shopping when they are in other countries or buying off the internet, the retailers said.
The government will release advance estimates for the fourth quarter on Jan 2.