Impact of Asian Slowdown on Singapore

Major Asian economies were growing robustly when the subprime crisis first erupted in July 2007. Economic growth in 2007 continued to be strong. Despite experiencing inflation in the first half of 2008, growth generally held up well, leading to suggestions that Asia had in fact decoupled with the developed economies.

However, since the middle of the year, there has been a marked slowdown in many Asian economies. While there are specific factors affecting each economy, Asian economies on the whole are beginning to feel the impact of the more general global downturn. Some economies like Japan, Taiwan and Korea are experiencing an export slowdown due to weaker demand in developed economies. Indonesia and Malaysia on the other hand are likely to grow slower due to the effects of weaker commodity prices. A comparison of the consensus forecasts made in November with those made in the beginning of the year illustrates this slowdown (Exhibit 1).

The impact of Asian economies slowing down is beginning to be felt in Singapore’s export figures. Collectively, Greater China (including China, Taiwan and Hong Kong), Japan, Korea and ASEAN-4(Indonesia, Malaysia, Thailand and Philippines) account for 53 per cent of Singapore Non-Oil Domestic Exports (NODX) in 2007. In the first half of 2008, Singapore’s NODX to these economies held up fairly well, registering small positive growth. Since the middle of the year however, growth rates have turned negative (Exhibit 2).

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