Cut in growth projection for the Singapore Economy

A DRAMATIC slump in July's manufacturing output has forced economists to cut back their growth projections for the economy.

Production fell 21.9 per cent - far more than had been tipped by experts - compared with July last year. It was also down 1.8 per cent from this June.

It has led economists to slash their GDP forecasts, with some tipping growth of as low as 3.3 per cent for the year when a few months ago figures of 5 per cent or more were being confidently put forward.

While the speed of the mood change has been striking, the trend from yesterday's figures is no surprise with the pharmaceutical and petrochemical sectors again the main drags. Both recorded reduced output, according to Economic Development Board (EDB) figures yesterday, although the sputtering electronics sector managed a small expansion.

With manufacturing accounting for a quarter of the economy, such dips spell trouble for overall economic growth.

'The manufacturing outcome today adds to the prospect of a technical recession,' said Standard Chartered Bank economist Alvin Liew. An economy technically slips into a recession when it has shrunk for two straight quarters.

Singapore's second-quarter GDP fell 6 per cent from the first quarter, although the Government has reiterated it does not expect a technical recession.

This is because construction and services are 'strong pockets of growth' that should support the economy in the current quarter and next, it has said.

But analysts say the dreaded R word will be a strong possibility when third-quarter data are out in October.

'Given the weaker-than-expected July industrial production numbers, we now think there is at least a 40 per cent chance of a biomedical-led technical recession in the third quarter,' said Citigroup economist Kit Wei Zheng.