Singapore’s close shave with recession

Singapore has been spared a widely feared recession. The government yesterday reported the economy grew 1.8 per cent in the fourth quarter of 2012 compared with the third quarter, when the gross domestic product shrank 6.3 per cent. But look how narrowly Singapore averted a recession in the third quarter. The revised estimates put out by the ministry show the economy grew 0,2 per cent, and not 0.5 per cent in the second quarter as previously reported. Two straight quarters of negative growth would have meant the economy was in recession.

2012 Q1Q2Q3Q4
GDP (quarter on quarter)9.50.2-6.31.8

Actually, the ministry initially reported the economy contracted 0.7 per cent in the second quarter compared with the first quarter. The ministry said so in this press release dated August 10, 2012.

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How Singapore averted recession

The Singapore economy grew 1.2 per cent in the 2012, averting a widely feared technical recession in the fourth quarter when the gross domestic product rose 1.8 per cent from the previous quarter. How? The answer is simple.

The hawker stall assistant, the salesgirl, the hotel cleaner, the delivery man, the property agent, the technician and, yes, the bankers collectively contribute more to the Singapore economy than the factory operators, construction workers and engineers. The city-state is becoming a service economy where “goods-producing industries”, including manufacturing and construction, account for just about one-third of the total gross domestic product.

Singapore 2011 GDP

This was their share of the 2011 GDP, and we will see the same pattern in earlier years and the first three quarters of 2012.

That is why there was no recession despite a continuing slump in the manufacturing and construction sectors. Manufacturing dropped for the third quarter in a row, down 10,8 per cent from the previous quarter, while construction fell for the second quarter, down 8.9 per cent. And yet the economy beat back recession on the back of a resurgent services sector. After falling two quarters in a row, the services sector gained 7 per cent. That was enough to avert a recession.

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Singapore averts recession

Singapore averted recession with the gross domestic product (GDP) growing 1.8 per cent in the fourth quarter compared with the third quarter when it shrank 6.3 per cent. If the GDP had shrunk for two quarters in a row, the economy would have been in a technical recession.

Analysts had been speculating Singapore had slipped into a recession after Prime Minister Lee Hsien Loong announced in his New Year message two days ago that the economy had grown 1.2 per cent in 2012 – lower than the 1.5 per cent forecast

The manufacturing sector – once the crown jewel of the economy – continued to be the Achilles heel, contracting for the third quarter in a row. The construction industry shrank for the second successive quarter. Singapore is becoming a service economy which depends on tourists, shoppers and the finance and banking industry. The services sector grew 7 per cent compared with the previous quarter after two straight quarters of negative growth.

 

The Trade and Industry Ministry reported today:

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Freefall: The world according to Joseph Stiglitz

Singapore is, by common consent, one of the most open economies in the world. Yet, more than 80 per cent of the Singaporeans live in public housing, the buses and trains are run by two government-linked companies, the mainstream media really state media – the television stations owned outright by a state investment firm, the print monopoly traditionally headed by former government ministers or officials – and many of the top local companies are also linked to the government.

And this economic model has worked very well for Singapore.

As I mentioned in an earlier post, Joseph Stiglitz says in his book, Freefall:

Government has played an especially large role in the highly successful economies of East Asia… Singapore, Korea, Malaysia, and a host of other countries followed and adapted Japan's (government-led growth) strategy and saw per capita incomes increase eightfold in a quarter century.

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Singapore GDP higher than before recession

Singapore GDP from second quarter of 2008 to second quarter of 2010

The Singapore economy has not only recovered from the recession but has grown bigger than it was before. The gross domestic product totalled S$72.6 billion (about $53.3 billion) in the second quarter of this year, considerably more than it was during the same period last year (S$61.1 billion) and the second quarter of 2008 (S$62.2 billion). That was before the recession, which began in October 2008. All the GDP figures are at 2005 market prices.

Manufacturing continues to play the biggest role in the economy followed by wholesale and retail trade, financial services and business services. See the next chart showing the performance of each industry.

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Singapore on a record high, here come the foreigners!

Here we go again.

Singapore is booming and earlier government projections have gone bust.

Not only has the government doubled its economic growth forecast to an astonishing record high of  13 to 15 per cent this year.

Plans to reduce the foreign influx and slow down to a more sustainable growth rate have also been put on hold.

More than 100,000 foreign workers are set to enter Singapore this year, reports the Straits Times.

Prime Minister Lee Hsien Loong is quoted as saying: "If we don't allow the foreign workers in, you are going to have overheating."

Read that as "Your wages will soar and property prices skyrocket until employers decide it is better to do business elsewhere."

So foreign workers do depress wages while making the economy more competitive, right?

Now if you think there are too many foreigners, well, you know what the government says: Make more babies.

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Singapore compared with other Asian economies

Singapore suffered a bigger drop in exports than China, Hong Kong, South Korea, Thailand and Vietnam during the recession. See the chart below based on the World Bank report released yesterday.

WorldBank-Merchandise-Expor

But the Singapore stock market rebounded more strongly than any other market in the region except Thailand, South Korea and Taiwan, according to the same report. This chart shows all four were back to nearly pre-crisis levels last month.

WorldBank-financial-market-

Hong Kong has bigger foreign reserves than Singapore, but look at China's growing giant pile.

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China visitors fell below 1m in Singapore in 2009

Singapore saw a sharp drop in visitors from China in 2009 when its exports to China exceeded imports from there for the first time in several years. The number of mainland visitors fell from more than a million in 2008 to about 936,700 in 2009.

Singapore_visitor_arrivals

Mainland Chinese are still the second biggest group of visitors after those from the Association of Southeast Asian Nations, including Malaysians, Indonesians, Thais and Filipinos. Their numbers rose marginally from more than 3.57 million in 2008 to over 3.68 million in 2009.

Visitors from Australia, the third biggest group, dipped from more than 833,000 to 830,000.

Indians continued to make up the fourth biggest group, although their numbers fell from 778,000 to 725,500, according to the Economic Survey of Singapore 2009 released by the Ministry of  Trade and Industry yesterday.

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Singapore economy 2009: GDP and jobs

Construction was the only industry to post double-digit growth –16 per cent — when the Singapore economy shrank 2 per cent in the 2009 recession.

Business services also grew by 3.3 per cent. The only other (faintly) bright spot was information and communications, which grew an infinitesimal 0.8 per cent. Financial services didn't do too badly in the downturn, shrinking only 1.4 per cent.

The big dips came in two key sectors: manufacturing, which accounts for the biggest share of the gross domestic product, and the wholesale and retail trade, which contributes the second biggest share. Wholesale and retail shrank by 9.1 per cent and manufacturing by 4.1 per cent.

All the figures here are from the Economic Survey of 2009 released by the Ministry of Trade and Industry today.

SingaporeGDP_and_jobs2009

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More people working in Singapore than before

More than 2.99 million of Singapore's 4.99 million population were working by the end of last year. That's more than ever in the last decade, as this chart shows.

Employed_singapore

The number of jobs actually went up despite the recession. So did unemployment — marginally.

But the good news is overall unemployment fell from 3.4% to 2.1% in the fourth quarter, according to preliminary estimates by the Ministry of Manpower. Unemployment among Singapore residents — citizens and permanent residents — fell from 5% to 3% during the same period.

That can be no consolation for the 87,000 residents who found themselves jobless last year, up from 62,900 in 2008. Overall unemployment rose to 3% last year from 2.2% the year before and, for Singapore residents, from 3.2% to 4.3%.

Unemployed_singapore

But as the Manpower Ministry press release says:

Local employment grew by 43,000 in 2009. In contrast, foreign employment fell by 4,200 compared to a record increase of 156,900 in 2008. As at December 2009, there were 1.05 million foreigners forming 35.2% of the 2.99 million persons employed in Singapore. The majority comprising 64.8% or 1.94 million persons employed were locals.

So the number of locals employed has gone up from 1.9 million in 2008. The number of foreigners working has dipped from 1.057 million to 1.053 million. There were just under a million foreigners working in Singapore in 2007 and the figure in 2006 was 756,000.

Working_residents_foreigner

All the figures in these charts are based on data from the Statistics Department of Singapore and the Ministry of Manpower. The employment figures for 2005 to 2009 are taken from the preliminary estimates given by the ministry at the beginning of the year and for 2004 to 2001 from the ministry's mid-year estimates presented on this page.

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