Singapore Slides into Recession in Third Quarter

By ALEX KENNEDY / AP WRITER

SINGAPORE — Singapore's economy has skidded into a recession for the first time since 2001, the government said Friday, warning that it could contract by up to 1 percent next year as a global slowdown saps export demand.

The city-state's economy shrank 6.8 percent in the third quarter from the previous quarter, more than the 6.3 percent contraction estimated last month, the Trade and Industry Ministry said in a statement.

"Singapore's economy is expected to face a broad-based slowdown in 2009," the ministry said. "Considerable uncertainty remains as to how deep and long this downturn will last."

In the second quarter, gross domestic product declined 5.3 percent. Two straight quarters of economic contraction is the traditional definition of a recession.

Compared to a year ago, the economy shrank 0.6 percent in the third quarter, the ministry said.

The government expects economic activity of between negative 1 percent and growth of 2 percent in 2009, and it cut the city-state's 2008 growth forecast to 2.5 percent from 3 percent.

The global economic downturn has dried up demand for Singapore's exports and hurt the financial sector. Manufacturing slid 10 percent in the third quarter from the previous quarter, while construction fell 11 percent and financial services plunged 22 percent, the ministry said.

"The slowdown in international and regional trade will significantly impact our wholesale trade and the transport and storage sectors," the ministry said.

The government cut its inflation forecast for next year to between 1 percent and 2 percent from between 2.5 percent and 3.5 percent, the ministry said.