Economy shrinks for the first time in 3 quarters

Singapore's gross domestic product contracted 6.8 percent after reaching 14.9 percent for the period of July to September 2009.

A Bloomberg report cited weaker manufacturing output as the factor causing an interruption to Singapore's recovery from the recent recession. Overall, the shrink in economy for last year is at 2.1 percent. The report added that Singapore's dependence on exports, particularly in the pharmaceutical and electronics fields, has made the island vulnerable to fluctuations in global demand and business cycles.

Robert Prior-Wandesforde, senior Asia economist at HSBC Holdings in Singapore, said, "The weakness of the fourth quarter was almost entirely attributable to a reversal" in pharmaceutical output from the previous six months. "Activity and inflation will surprise on the upside, making a move back to modest and gradual appreciation of the Singapore dollar slightly more likely than not at the next meeting," he added, as economists believe the central bank may allow the strengthening of the Singapore dollar at the monetary policy review in April.

Other sectors are expected, however, to negate the impact of the recent GDP decline. Tetsuji Sano, a Singapore-based economist at Nomura Holdings Inc., said, "We see the GDP decline as temporary and the economy will pick up this year as the services industry gets a boost from the opening of the casinos and tourism-related sectors."