Global recession likely, Singapore says
September 6, 2011 - 12:54PM
A global recession is more likely than not as the US and European economies are at "stall" speed, Singapore's finance minister says.
Tharman Shanmugaratnam told a conference that the world has now "entered a phase where there is a self reinforcing cycle" of a loss of consumer confidence, which is leading companies to hold back on investing.
"Asia will not be immune to a global slowdown. We are already at stall speed in US and Europe, which means we are now more likely than not to see a recession," Mr Tharman said.
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The Singapore economy, which contracted in the second quarter of 2011, is highly sensitive to international trade.
Global markets have tumbled in the past month on increasing signs that the world's recovery from the global financial crisis is stumbling.
A US report on Friday showed no growth in jobs in August and the unemployment rate holding at 9.1 per cent, deepening concerns that the world's biggest economy may be tilting toward another recession.
Policymakers in Europe are struggling to contain a growing debt crisis and World Bank president Robert Zoellick has warned that the world economy is stepping into a "new danger zone".
In the latest sign that the economic slowdown may hurt Asia, the Singapore Institute of Purchasing & Materials Management said on Monday that the manufacturing sector shrank for the second consecutive month in August as companies received fewer orders and kept less inventory.
"I am not making a prediction but we are at a stage ...where each new shock takes you in the direction of a recession," said Tharman, who is also chairman of the IMF's International Monetary and Financial Committee.
"The markets tend to over react but the markets do tell us something... Directionally, the markets are telling us something very serious."
Despite the concerns, Barclays Singapore-based economist Rahul Bajoria said his bank believed a recession will be avoided.
"We expect data in the US to show some uptick from here on, labour markets look weak at this point but consumer spending picked up in July. This bodes well for GDP. Oil prices have also retraced, which will have a positive impact on US consumer confidence," Mr Bajoria said.
Reuters
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