Date: Tue, 14 Apr 2009 14:20:07 GMT
Local: Tues, Apr 14 2009 10:20 pm
Subject: Re: Singapore economy declined 11.5% in Q1 2009
"truth" wrote in message
> That's rite, the Singapore economy in freefall.
> It contracted 11.5% in the first quarter of 2009.
> It will continue to contract. The pap Leegime
> has run the Singapore economy into the ground
> thru unsound policies and stupid judgements.
SINGAPORE - Singapore's central bank eased monetary policy by
effectively devaluing its currency to counter a record economic slump while
also keeping a lid on domestic interest rates.
The currency is Singapore's main policy instrument, and the central
bank on Tuesday repeated what it had done in previous downturns in 2002 and
2003. It shifted the centre of the secret trade-weighted band for the
Singapore dollar to the existing weak level of the exchange rate basket in
an actual one-off devaluation.
Based on their estimates of where the currency had been trading before
the move, economists said the Singapore dollar might have been devalued by
1.5 to 2 per cent. The currency's rally on Tuesday suggested market
participants had expected a bigger move.
'There had been some expectation that the re-centring would be as much
as a 400 basis points depreciation,' said Claudio Piron, a strategist with
Faced with slumping exports, the deepest recession on record and
growing speculation of Singapore dollar depreciation, devaluing the currency
had been the Monetary Authority of Singapore's best option for the
Other options such as gradually steering the currency lower or
widening the width of the trading band would have stoked speculative selling
of the currency, thereby pushing yields higher.
'A more radical policy action may have been viewed as
counter-productive in terms of operational policy band management and
foreign exchange reserves preservation,' Mr Piron said.
Those moves could stir further market expectations for currency
depreciation, which would have led to withdrawal of local currency supplies
from the system, he said.
Tuesday's monetary easing came as Singapore's economy contracted a
record 11.5 per cent from a year earlier in the first quarter of 2009, more
than a market median forecast of an 8.8 per cent slump. The Ministry of
Trade and Industry expects the economy to shrink 6-9 per cent this year.
'Given all these horrendous numbers, this policy change is not a big
surprise. It is reflecting the free fall in external demand,' said Song Seng
Wun, economist at Malaysian bank CIMB in Singapore.
The Singapore dollar, which has been emerging Asia's second-worst
performing currency this year, strengthened to a two-month high of 1.497
against the US dollar, from 1.515 before the announcement, and was trading
at 1.5036 by 0300 GMT.
'The market was expecting a more aggressive easing policy and it did
not come about. The bet on the Singapore dollar will be less aggressive,'
said Irene Cheung, currency strategist at Royal Bank of Scotland in
The country's gross domestic product in the first three months of the
year fell at a seasonally adjusted, annualised pace of 19.7 per cent, the
ministry said. The central bank said the economy is likely to remain below
its potential growth rate until a decisive recovery in exports.
'MAS will therefore re-centre the exchange rate policy band to the
prevailing level of the S$NEER, while keeping the zero percent appreciation
path,' the central bank said in its twice-yearly monetary policy statement,
referring to the currency's nominal effective exchange rate.
The Monetary Authority of Singapore sets policy by managing the
Singapore dollar in a secret trade-weighted band against a basket of
currencies, instead of setting interest rates.
The bank has to tread a fine line between allowing its currency to
weaken to help exporters while avoiding giving its neighbours the impression
that it is seeking to make its currency more competitive in export markets.
Vietnam has depreciated its dong, while central banks in Thailand and Taiwan
seem to be tolerating weakness in their currencies.
Central banks from Wellington to Bangkok have slashed interest rates
sharply in recent months and some central bankers said they intend to wait
and see how much good their rate-cutting had done to their battered
economies before taking more action.
Singapore eased policy at its last policy review in October for the
first time since 2003 to support an economy that was the first in Asia to
fall into recession last year.
Economists said the economy could be nearing a bottom as its non-oil
exports (NODX) fell 17 per cent year-on-year in March after a record 35 per
cent plunge in January and a 24 per cent fall in February. Shipments to
China jumped 14 per cent in March.
'Although we are seeing some faint heartbeats in the Singapore economy
with better-than-expected March NODX numbers, we have not seen the bottom
yet. With inflation easing and external demand fragile, the shift in policy
remains appropriate,' said CIMB's Mr Song, calling for the Singapore dollar
to weaken to 1.60 by the end of the year. -- REUTERS