Singapore's worst economic crisis since independence is even more severe than expected, with output now forecast to shrink by as much as 9.0 per cent in 2009, official data showed on Tuesday.
The Ministry of Trade and Industry (MTI) said gross domestic product (GDP) would fall by 6.0 to 9.0 per cent this year, a stunning downgrade from the previous official estimate of a decline of 2.0 to 5.0 per cent.
"MTI's earlier forecast had factored in the likelihood of a weak first quarter, but the advance estimates indicate that actual GDP growth will undershoot earlier expectations by a significant margin," it said.
Prior to this year, Singapore's worst performance since it became a republic in 1965 came in 2001, when the economy contracted 2.4 per cent.
The revised 2009 outlook was the fourth downgrade since November, a reflection of the severity of the recession confronting the trade-dependent island as electronics and other manufactured exports continued to plunge.
However, Standard Chartered bank said projections that Singapore's economy may contract by more than 10 percent in 2009 "seem overly pessimistic to us."
The country's influential founding father Lee Kuan Yew warned last month that the economy may shrink by 10 percent if exports continue to fall sharply.
The revised outlook came as fresh data showed GDP shrank 11.5 per cent in the first quarter from a year ago, far worse than the 4.2 per cent decline recorded in the preceding quarter.
The 11.5 per cent fall is the worst ever for a single quarter since records began in 1976. Singapore's previous record quarterly contraction was in 2001 when GDP shrank 6.4 per cent in the third quarter of that year.
On a seasonally adjusted annualised basis, GDP declined 19.7 per cent in the first quarter this year, also a record, compared with 16.4 per cent in the previous quarter, the ministry said.
The estimate is based on preliminary data computed mainly from the first two months of 2009 and a fuller picture is likely to emerge next month.
Almost every sector of the Singapore economy was hit in the first quarter with manufacturing especially affected because of the fall-off in exports, the ministry said.
Manufacturing shrank 29 percent in the first quarter from a year ago, pulled down sharply by declines in crucial exports of electronics, chemicals and biomedical products.
"With most of Singapore's key trading partners still in recession, the manufacturing sector will continue to remain weak for the rest of the year," the ministry said.
The revised GDP forecast was made after key exports, known as non-oil domestic exports (NODX), fell by an estimated 17 percent in March to 11.88 billion Singapore dollars (787 million US) from a year ago.
Singapore's trade promotion agency, International Enterprise Singapore, said the drop in March NODX was due to continued declines in shipments to its key markets especially the United States, the European Union and Japan.
Shipments to the top 10 NODX markets fell in March with the only exceptions being China and Hong Kong, the trade promotion agency said.
The Monetary Authority of Singapore (MAS), the de facto central bank, announced Tuesday in a separate statement that it was adopting an easier policy stance, a move widely expected by analysts.
The MAS said it lowered the trading band for the Singapore dollar, which essentially allows the local currency to depreciate. Singapore last eased its monetary policy in October 2008.
Singapore conducts its monetary policy mainly via the Singapore dollar, rather than through interest rates, because of the economy's heavy dependence on trade.
The currency is hovering around 1.50 to the US dollar.