Singapore Sinks Into Recession

Singapore fell into recession as 1998 ended, according to figures in the prime minister's New Year's message Thursday that revealed a 1.5 percentage contraction of the economy during the last quarter.

But Prime Minister Goh Chok Tong never used the word recession in his speech. Instead, he put a positive spin on the news, saying the city-state's growth for the entire year was 1.3 percent and describing it as "not a bad performance, considering the unfavorable climate."

The International Monetary Fund defines recession as two consecutive quarters of contraction, putting Singapore in the same recessionary boat as other Asian countries such as Japan, Malaysia and Thailand.

Singapore's economy shrank by 0.7 percent in the third quarter, which was the first time since 1986 the Southeast Asian economic hub recorded a year-on-year contraction.

Although Goh had said recession might come in 1999, government leaders had hoped the first two quarters of positive growth - 6.2 percent and 1.8 percent, respectively - would buoy the economy through the end of the year.

After noting in the fifth paragraph of his statement that the economy contracted from the previous year, Goh said that it had shrunk 1.9 percent from the previous quarter.

"However, for 1998 as a whole, the economy grew by 1.3 percent," he said.

Goh also said 1999 "will be another difficult year," and cast doubt on predictions by the government's own Ministry of Trade and Industry that the economy would grow slightly or decline by only 1 percent.

Singapore escaped immediate damage from a regionwide crisis which broke out in 1997, a year when the country enjoyed economic growth of 7.8 percent.

But the regional malaise caught up with the resource-scarce republic of 3.1 million people in 1998. More than 30,000 people have been laid off, bankruptcies are up, and for the first time, the government has gotten involved in limited welfare programs.

Despite wage freezes, tax and fee reductions and other measures aimed at keeping Singapore competitive and encouraging international businesses to stay, more layoffs next year will be unavoidable, Goh said.

"Our economy is driven primarily by external demand," Goh said. "The environment has changed swiftly. Contagion has spread from country to country."

Singapore has enjoyed average annual growth of 8.9 percent since independence in 1965.