Singapore GDP contracted 11.5% in Q1 2009, depression marker reached

This article belongs to the Singapore recession watch story arc.

channelnewsasia.com :

Singapore's worst economic crisis since independence is even more severe than expected, with output now forecast to shrink by as much as 9% in 2009. The Ministry of Trade and Industry said GDP would fall by 6-9% this year, a stunning downgrade from the previous estimate of a 2-5% decline, and the fourth downgrade since Nov 2008. Lee Kuan Yew had warned that the economy may shrink by 10% if exports continue to fall sharply.

The revised outlook came as data showed GDP shrank 11.5% in Q1 2009 from a year ago, far worse than the 4.2% decline in the preceding quarter, in the worst ever showing since records began in 1976. On a seasonally adjusted annualised basis, GDP declined 19.7% Q1 2009, also a record, compared with 16.4% in the previous quarter. Manufacturing shrank 29% in the first quarter. The revised GDP forecast was made after non-oil domestic exports (NODX) fell by an estimated 17% in Mar 2009.

- With the latest official report confirming Singapore's GDP contracting by over 10% year-on-year, it is apparent that the economy has reached one of the two markers that would indicate an economic depression. Unlike economic recessions, which are widely defined as two or more consecutive quarters of year-on-year GDP contractions, there are no widely accepted standard markers of economic depressions, probably because they are so rare in occurrence.

Well it looks like the rare has occurred. Some economists and many members of the contrarian community use these two markers to define economic depression : 1. a fall in year-on-year GDP of 10% or more, or 2. an increase in unemployment rate to 10% or higher. Hence according to the first indicator and pending the occurrence of the second, Singapore's economy is probably in depression, though whether the widely anticipated "second-half recovery" will make it a short fleeting one or if we'll get a "double-L" impact later on is something we have yet to see.

If there is currently any good news out of all this, it is the fact that, according to the Singapore Department of Statistics, the unemployment rate is (or rather was) still at a rather manageable rate of 2.5% at least as of Dec 2008. Of course with the collapse of exports figures and the 6-month lag effect, the unemployment rate is expected to rise.

The current theme on the mainstream media is that of recovery. The contrarian community has discounted this as an artifact of the next round, now still at an early stage, of inflation. With central banks pumping vast quantities of money into the system, we can only hope that they try not to overshoot too much, as they usually tend to.

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