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Latest MTI statistics – Heading towards growth or recession?

by Leong Sze Hian

I refer to the latest press release published by the Ministry of Trade and Industry (MTI). It announced that Singapore economy is expected to grow by around 15.0 per cent in 2010 and by 4.0 to 6.0 per cent in 2011.

It claimed that the biomedical manufacturing cluster is “expected to recover with higher production of active pharmaceutical ingredients and restocking activities of several companies. The financial services sector should also continue to recover, supported by resilience in the core banking and insurance industries.”

However a closer look revealed a less optimistic piece of news.

According to the report, GDP for the last quarter “fell sharply by 18.7 per cent, a reversal from the growth of 27.3 per cent in the preceding quarter.”

Retail Sales Index declining since Febuary

The latest Retail Sales Index, released by the Department of Statistics on 15 November is also worrying.

Retail Sales, on a seasonally adjusted basis, decreased 2.4 per cent in September, compared to August.

This means that with the exception of July and August, Retail Sales has been declining since February.

Against Retail Sales in September 2009, the rise was a miserable 0.3 per cent. Considering that last year was the worst recession in Singapore's history, this miniscule increase is rather pathetic.

What is perhaps even more alarming, may be that the seasonally adjusted Retail Sales Index at current prices at 102.2 in September, is even lower than the 111.1 in January.

At constant prices, the Retail Sales Index at 95.2 in September is lower than January's 105.6

This is a total decline of about 10 per cent.

The above statistics seem somewhat bizarre, when media reports keep saying that the economy is expected to be the fastest growing in the world this year, at 13 to 15 per cent.

In spite of the relentless import of foreign labour, foreign investment, the opening of the two controversial integrated resorts (IRs) and the monetary policy to strengthen the Singapore dollar which may have attracted short term hot money inflows into Singapore, to grow GDP, the economy seems to be faltering.

By definition, a technical recession occurs when there's two consecutive quarters of sequential contraction.

Let's hope that MTI's prediction that the economy is likely to experience a modest sequential upturn in the fourth quarter will come true.