Singapore is likely to be the Asian economy that is worst affected by a United States recession, said economists. This is because it is one of the most open economies and has a large manufacturing sector.
Unusually, the NBER does not define a recession as two straight quarters of shrinking economic output. Instead, it looks for a decline in economic activity, spread across the economy, and lasting more than a few months. The figures it uses include overall economic output, industrial production, payroll employment, personal incomes, and wholesale and retail trade.
CIMB-GK regional economist Song Seng Wun said that among Asian economies, Singapore and Hong Kong would feel the biggest impact from a US slump, as they are 'the most exposed, most trading-oriented, with the least shelter from domestic consumption. Singapore also has a slice of manufacturing, unlike Hong Kong. We will get a double whammy from a slump in manufacturing and services.'
DBS Bank chief economist David Carbon said: 'Singapore and Hong Kong are bearing the brunt of the impact in Asia. Singapore is being hit as it is very small and extremely open.' But he was quick to point out that the impact of a US recession on Asia is less significant than in previous downturns, as 'Asia is now more capable of standing on its own'.
The US is Singapore's third-largest trading partner, with total trade hitting S$88.2 billion last year. Economists identified the technology sector, electronics sector and certain parts of the services sector as those that will be the most severely hit by the US downturn.
OCBC Bank economist Selena Ling said: 'It will be a bumpy ride going ahead for Singapore, especially for manufacturing and export-related industries. Moving forward, the services side will feel the impact of a slowdown, as we are talking about job and wage cuts.'
DBS economist Irvin Seah said manufacturing would be the worst hit, with electronics dragging down sectors such as precision engineering. Sentiment-driven sectors such as financial and real estate will be affected by the continued weakness in investor confidence, as will externally oriented services like tourism and hotels and restaurants.'
Economists anticipate the fourth quarter of this year to be the worst for the US, with some predicting as much as a 5 per cent contraction. Many of them believe the current downturn will be the most severe since the 1981-82 recession. But some feel that the lower base numbers will provide room for an economic rebound next year. The best-case scenario? Recovery in the first half of next year, with the end of recession in the second half.
OCBC's Ms Ling said: 'It will probably be a U- or L-shaped recovery. But we are not heading for a Great Depression kind of scenario due to proactive, more aggressive policy responses from the US government.'
However, some were more pessimistic, predicting that this could become the worst economic crisis since World War II.
Mr Jeffrey Frankel, a Harvard University economist who sits on the NBER's committee, told CNBC television: 'This is going to be probably a deep and long recession. It could be the worst post-war recession.'
WHY THE UNITED STATES IS IMPORTANT TO SINGAPORE
KEY U.S. RECESSION FACTS
Comments: If you want to assess how a country is going to be affected by the US led turmoil, one should consider:
a) the level of open-ness of the economy to trade
b) the level of trade with the US and Europe
c) whether the country has substantive domestic economy (I would classify those countries with at least a 60m population to be able to negate global repercussions)
d) the degree of reliance on FDIs
e) Competitive advantage & shortcomings
f) Responsiveness by government
Then make your own conclusions.
p/s photos: Pace Wu Pei Ci
3 comments:
wow, things looking better and better for genting, eh?
not.
So, sentosa might be down the crapper too, huh?
Geez...
The world is ruled by letting things take their own course. It cannot be ruled by interfering.
Obviously, an open economy like the Singapore and HK will be very much affected when the economy activities that were support by the external demand from USA and Western Europe began to disappear with the current global slump. The negative domino effects has fast spreading across to other export orientated nation in Asian continental. That's understandable and well acknowledged by the local authorities in the said area. The masses mentalities have been position into "actinable mode" and major initiatives have been triggered by its people, corporate leaders and decision makers to reduce the negative impacts to the minimum level in the wake of the current economy depression.
However, i'm sad to say that in Malaysia the decision makers and economy think tank were too defensive in its approach and too political motivated in their attempt to picture a less gloomy prospect in the current ecomony meltdown!
My goodness.....we still have economists dare to picture the prospect of 3.5% growth for next year and even worst....there is a 5% potential growth in 2009forecasted by the Asian strategic studies highlited in one of the forum yesterday. What the hell of these people are doing and contributing for our beloved country?????
The cynic is....the same day the oct key figures released by the authority revealed the complete contradicting pictute! We are in the stage of heading to the negative growth in 2009 unless miracle happen.....and nearly 100%negative growth in 2010 as the skrinking in key exports (electronic, textile, palm oil and petrol, sufficient to name few..) are still at the begining stage (oct 08).
Good day.
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