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.
Some time ago, Singapore’s heavily export-oriented growth model came under fire. The Wall Street Journal published an opinion piece, criticising the lop-sided dependence on exports and the crowding out of the private sector by the government:
The export-led economy is falling on its face. Minister Tharman Shanmugaratnam predicts the city-state is “likely to experience” the deepest recession in its history. The government will tap its reserves to help pay for the stimulus package. Growth contracted 16.9% in the fourth quarter last year. The Ministry of Trade and Industry has revised down GDP forecasts twice this month already, and expects the city-state’s growth to contract 2% to 5% this year. The pain is now leaking into the domestic economy as consumers retrench.
Singapore’s economy would be more resilient if it were better balanced. Consumption composes only about 40% of GDP — far less than other developed Asian economies, nearer to 55%. Yesterday’s budget doesn’t do much to change long-term incentives to consume. The government announced a 20% income-tax rebate for one year, but no permanent cuts. Nor did it cut the 7% goods and services tax. Singaporean workers and businesses invest a total of 34.5% of wages into the state pension fund, but receive less than a 2% return from the government. That’s a measly payout compared to what private funds return over long investment periods.
These thoughts and others were echoed by many financial and economic analysts around the world. Naturally, however, Singapore’s government took a stand against its critics, and Tharman Shanmugaratnam was forced to declare that “Singapore’s Growth Model Works”, in defence of the government’s economic policies:
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