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Slowdown rocks Singapore GDP
SINGAPORE -- Singapore has effectively eased monetary policy after new data showed its SARS-hit economy suffered a worse than expected contraction in the June quarter. The government said Thursday the economy shrank at an annualized rate of 11.8 percent over the previous quarter. That was more than double the expected four percent decline, with manufacturing hurt by the Iraq war and services devastated by the SARS impact on tourism, hotels, restaurants and retailers. As a result, the central Monetary Authority of Singapore on Thursday said it was re-centering the exchange rate policy band at the current level of the Singapore dollar's nominal effective exchange rate (NEER). Standard Chartered Bank chief economist Steve Brice told CNN Thursday that Singapore had effectively weakened its currency band by 1.5 percent. While the central bank's action was a positive step, its impact was marginal, he said. "It doesn't really help Singapore's competitiveness." Brice said that the manufacturing and services sectors had been badly hit in the April-June quarter, delivering a result that was much weaker than expected. He said the services sector -- which accounts for about 62 percent of Singapore's gross domestic product -- had "underperformed significantly". The Singapore dollar fell on news of the central bank's policy statement Thursday. It eased from two-week highs hit in offshore trade to 1.7590 per U.S. dollar, against late Wednesday's 1.7544. "They (the MAS) have reset the mid-point of the band to today's level of the NEER and given we were in the weaker end of the band that means they are locking in some of the Singapore dollar's recent weakness," David Simmonds, a strategist at Royal Bank of Scotland, told Reuters news agency. In the year to the second quarter, gross domestic product -- the total value of all goods and services -- contracted 4.3 percent, the Ministry of Trade and Industry said in its advance estimate of GDP. The advance number is compiled from existing April and May data plus an estimate for June, analysts said. The government left its growth estimate for 2003 unchanged at 0.5 to 2.5 percent, but said it would review the full year forecast in August. "Barring any adverse external shocks economic performance in the second half is expected to improve," the government said in a statement. Brice told CNN that while the markets were expecting a pickup in the United States, particularly in the electronics sector, the actual data was not showing that to be the case yet. "It is still pretty weak. It comes down to what happens in the U.S.," Brice said. Singapore politicians have warned that disruptions from the flu-like SARS outbreak, which was declared vanquished in May, could lead to greater job losses as companies downsize, Reuters reported. Singapore's gross domestic product in the first quarter grew at an annualized rate of 1.2 percent against the previous quarter and better than 0.4 percent growth in 2002's fourth quarter. But the economy lost steam in the second quarter after a seemingly solid start as visitor arrivals tumbled 67 percent in April and a record 72 percent in May, emptying hotels and hurting restaurants in the aftermath of Severe Acute Respiratory Syndrome.
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