THE TRADE-DEPENDENT Singaporean economy contracted by a record 11.5 per cent in the first three months of 2009 from a year ago as non-oil exports fell 17 per cent in March, the 11th consecutive monthly decline.

The sharper than expected deterioration in the economy’s performance forced the government to cut its full-year GDP forecast from minus 6 per cent to minus 9 per cent, which would make it Singapore’s worst post-war recession and Asia’s worst economic performer this year. The economy contracted 4.2 per cent in the fourth quarter of 2008.

Previously, the worst downturn in Singapore occurred in 2001 when the economy contracted by 2.4 per cent due to the bursting of the global technology bubble. Lee Kuan Yew, Singapore’s elderstatesman, recently said that it could take as long as six years before the economy makes a firm recovery.

The Monetary Authority of Singapore (MAS), the de facto central bank, also devalued slightly the currency as it re-centred the secret policy band that pegs the Singapore dollar to a basket of international currencies.

The move is expected to result in a 1 per cent to 3 per cent devaluation of the currency, but MAS said there was no reason for any undue weakening of the Singapore dollar since inflation is likely to stay at minus 1 per cent to plus 1 per cent this year. The latest data revealed the plunge in exports is slowing from a 35 per cent drop in January and 24 per cent in February. But there are worries that the continued weakness in the US economy will hurt exports for the rest of the year.

However, some economists argue that the dire figures for the first quarter suggest the economy has bottomed out and might start recovering or at least stabilise as the pace in the decline in exports slows.

Economists at banking groups said they were sticking with their forecasts that the economy could contract by 4 per cent to 5 per cent this year, with many saying the government estimate was too gloomy.

The poor economic data could set the stage for a much-discussed second stimulus package on top of a S$20.5 billion (€10.3 billion) programme announced in January.

Lee Hsien Loong, the prime minister, said: “The crisis will eventually pass, but we will not be back to the situation before 2007.

“This is therefore an opportune time for the government to review our policies and strategies.” – (Copyright the Financial Times Limited 2009)