Sunday, March 01, 2009

"2008 Was a Year to Forget" - 2009 Probably will be One to Forget, Too

Singapore's MTI recently released the country's Q4 2008 economic statistics. The numbers are, quite simply, absolutely dismal.
Singapore's economy shrinks 16.4% annualized rate in Q4
By Chris Oliver
Last update: 9:33 p.m. EST Feb. 25, 2009

HONG KONG (MarketWatch) -- Singapore's economy contracted at an annualized 16.4% in the October-to-December quarter, its sharpest pace of contraction in 33 years, according to revised figures released Thursday by the Ministry of Trade and Industry. For the whole of 2008, the economy grew 1.1%, after expanding 7.8% the preceding year, the ministry said in the 169-page Economic Survey of Singapore report. The manufacturing sector declined 10.7% in the fourth quarter on year, while the services sector was down 1.3%. Initial estimates published in January were for a 16.9% annualized contraction in the fourth quarter.

Think that's bad?

Wait until you compare this contraction with other economies around the world, and you'll see how bad it really is.The following image, courtesy of the Business Times, tells a thousand words.

Hmm. No wonder that Singapore's economists are not particularly optimistic. Here's some quotes to ponder, and enjoy (bold added):
'The manufacturing weakness story is well known, but the main thing is the speed and severity with which the services sector rolled over,' said OCBC economist Selena Ling. 'When two of your engines fall off, you can't see the economy flying at all.'

...latest estimates prompted OCBC to cut its 2009 full year forecast, from -2.8 per cent to -4.8 per cent. 'Frankly, we don't see any light at the end of the tunnel for financial services. It will be the main drag on services,' said Ms Ling. 'And we think consumption will fall off the cliff once we get the retrenchment numbers.'


'Broadly speaking, 2008 was a year to forget,' said Standard Chartered economist Alvin Liew. 'The data revision was minimal. It was already bad but it got a little bit worse,' he said.

Well well, I guess the PAP ministers can't possibly be patting their backs this time, like they always do each time Singapore announces its economic growth numbers. A marketwatch commenter has hit the nail squarely on the head:
"Wonder if their egos shrank at the same rate? They must have put the economy through the wringer and then the dryer. Should never wash cotton economies in hot water and then dry in dryer."

Ha ha ha. But now let's get serious.

What's the prospects for Singapore's economic recovery? How is our growth possibly going to be restored? Stanchart's Mr Liew, again:
Stanchart's Mr Liew noted that much of the fall-off in total demand was due to a 9.6 per cent drop in external demand in the fourth quarter. ...

'The recovery process - if we see any at all - needs to come from the external sector. If that doesn't recover, we are looking at a very protracted downturn,' he said.

Singapore's export oriented economy means that any recovery is going to be driven by a revival in exports, driven by our biggest export markets - US and Wester Europe. And what's happening to those economies right now? Hmm... let's see:
A raft of data due out is expected to show the recession-hit economy is worsening. Among the reports, non-farm payrolls for February will shed light on the labor market, with analysts expecting unemployment to reach 7.9 percent.

Following Friday's fall in U.S. stocks, with the S&P 500 closing at a 12-year low, analysts are watching to see if indexes can hold and recover from these lows, suggesting a bottom has been formed, or whether stocks have further depths to plumb.

"We continue to get hit on a daily basis by very bad economic news and the markets are trying to put in a stand here at the November 2008 lows," said Michael Sheldon, chief market strategist at RDM Financial in Westport, Connecticut.

- Banks and economy to keep bears' grip on stocks, Reuters

Mr Buffett isn't the most optimistic person about the economy either:-
In his eagerly anticipated annual letter to Berkshire shareholders, Buffett also offered a gloomy economic outlook, saying "the economy will be in shambles throughout 2009 -- and for that matter, probably well beyond."

And how about Europe?
European Union economic confidence plunges to new low
MARK SMITH, Deputy Business Editor, February 27 2009

Business and consumer confidence across the 27-nation European Union plunged to new low in February, an influential survey has revealed in the latest sign that the recession is continuing to deepen in the UK's largest export market.

The declining global economy seriously hampers the ability of any nation to trade its way out of recession - and the apparent advantages of weak sterling remain of little consequence to exporters in a world where demand has fallen off a cliff.

News of the latest survey, conducted by the European Commission, also came as the unemployment rate in Germany, Europe's largest economy, edged up to 8.5% in February following a much sharper rise the previous month.

Sorry to break all the bad news, but i guess the state of the economy is what it is right now. No use papering over the cracks.

I guess it's not a surprise then that "PM Lee ... did not rule out the possibility that the Singapore economy could shrink by as much as 8 per cent this year." (ST)

What?? 8% contraction?? The world's highest paid head-of-state and you're talking about an 8% contraction?

Surely, you have got to be kidding me.

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