Singapore's economy slowed sharply in the second quarter as industrial production fell due partly to global supply chain disruptions caused by Japan's quake, analysts said Thursday. Softer spending in the United States and other major economies as governments wound down stimulus packages implemented during the global recession also led to easing demand for Singapore exports, they said.
The Ministry of Trade and Industry said second-quarter gross domestic product (GDP) grew an annual 0.5 percent, compared with 9.3 percent in the previous quarter. The ministry said the manufacturing sector shrank 5.5 percent from a year ago as key export markets the United States and Europe suffer renewed economic troubles.
"The Japan twin disasters disrupted the global supply chain - of which Singapore is a part - in April and May," said Song Seng Wun, a Singapore-based regional economist with financial group CIMB, referring to the giant quake and tsunami that struck the country on March 11. This affected exports of a wide range of goods from auto parts, electronics components to paint pigments, he added.
The trade ministry said the moderation cut across all sectors of the economy, including construction and biomedicals. Analysts however said orders are expected to ramp up in the second half of the year ahead of the year-end holidays, and were confident the government's official growth target of 5-7 percent this year will be achieved.
The economy expanded 14.5 percent in 2010. Analysts also said the Monetary Authority of Singapore was unlikely to alter its monetary policy during the next scheduled review in October, which means the Singapore dollar will be allowed to remain strong. Unlike other countries which use interest rates, Singapore relies on the exchange rate to conduct its monetary policy because economic growth is driven primarily by external trade.
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