NST Online reported that Singapore has become the first Asian economy to fall into recession. This view by analysts comes in the wake of the Singapore government's downward revision of its full-year growth estimate and, the decision to ease monetary policy for the first time in years.
The Singapore Ministry of Trade and Industry lowered the city-state's full-year growth forecast to around three per cent, citing a slowdown in the global economy and key domestic sectors.
The move came as the ministry released preliminary data showing that real gross domestic product (GDP) declined by 6.3 per cent in the third quarter after contracting 5.7 per cent in the previous quarter, the ministry said.
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While it did not describe the economy as being in recession, a technical recession is generally defined as two consecutive quarters of contraction in economic output.
To deal with the downturn, the Monetary Authority of Singapore (MAS), Singapore's de facto central bank, said it was easing monetary policy for the first time in more than four years.
Induced recession?
This piece of news struck me because the Singaporean economy is a robust one. So, for Singapore to superlatively become the first Asian economy to enter recession strikes me as being very odd. Unless....
This is an interesting lesson in economic management, I believe. In the previous blog I had used the word induce. There is a strong possibility that the Singapore government is pre-empting the real wave of economic turmoil that affects the real economy where goods and services are produced and consumed.
There is a first-mover advantage in being ahead of the economic turmoil by inducing a recession. This is not a crazy as it sounds.
Think about it. The analysts are saying that Singapore is in the process of entering a recession. They say that this is a technical recession meaning that there will be (one quarter has passed but the second quarter in question is a forecast by the Singapore government) two consecutive quarters where negative growth is recorded. It is not a real recession yet.
This is a warning and alert by the Singapore government. It is a call to all players in the Singapore economy that the sh** is about to hit the fan.
The smart players, say, in the already moribund property sector, must take this as a signal to push out and sell as much of their property inventory as possible and use the cash to de-gear.
Likewise with manufacturers and wholesalers and retailers. The message is to pare down their inventory pronto. The signal is for them to reduce their bank borrowings as much as they can.
For the strong players, a lower interest will enable them to restructure their borrowings and use the cheaper working capital to make their production and marketing processes even more efficient.
.
.
And, when the real recession hits, the Singapore economy will be cushioned from the worst of it. They will get some hits, of course. That cannot be helped. But there will be fewer casualties and, their confidence would, by then, be on the mend. It really is quite a good tactic.
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Lessons
Malaysia's economic managers must pull out their note pads and take notes on this. It really is a good plan. Better to suffer a little now than be annihilated later.
The Singapore Ministry of Trade and Industry lowered the city-state's full-year growth forecast to around three per cent, citing a slowdown in the global economy and key domestic sectors.
The move came as the ministry released preliminary data showing that real gross domestic product (GDP) declined by 6.3 per cent in the third quarter after contracting 5.7 per cent in the previous quarter, the ministry said.
.
.While it did not describe the economy as being in recession, a technical recession is generally defined as two consecutive quarters of contraction in economic output.
Induced recession?
This piece of news struck me because the Singaporean economy is a robust one. So, for Singapore to superlatively become the first Asian economy to enter recession strikes me as being very odd. Unless....
This is an interesting lesson in economic management, I believe. In the previous blog I had used the word induce. There is a strong possibility that the Singapore government is pre-empting the real wave of economic turmoil that affects the real economy where goods and services are produced and consumed.
There is a first-mover advantage in being ahead of the economic turmoil by inducing a recession. This is not a crazy as it sounds.
Think about it. The analysts are saying that Singapore is in the process of entering a recession. They say that this is a technical recession meaning that there will be (one quarter has passed but the second quarter in question is a forecast by the Singapore government) two consecutive quarters where negative growth is recorded. It is not a real recession yet.
This is a warning and alert by the Singapore government. It is a call to all players in the Singapore economy that the sh** is about to hit the fan.
The smart players, say, in the already moribund property sector, must take this as a signal to push out and sell as much of their property inventory as possible and use the cash to de-gear.
Likewise with manufacturers and wholesalers and retailers. The message is to pare down their inventory pronto. The signal is for them to reduce their bank borrowings as much as they can.
For the strong players, a lower interest will enable them to restructure their borrowings and use the cheaper working capital to make their production and marketing processes even more efficient.
.
.And, when the real recession hits, the Singapore economy will be cushioned from the worst of it. They will get some hits, of course. That cannot be helped. But there will be fewer casualties and, their confidence would, by then, be on the mend. It really is quite a good tactic.
.
.Lessons
Malaysia's economic managers must pull out their note pads and take notes on this. It really is a good plan. Better to suffer a little now than be annihilated later.
1 comment:
The year 2008 had been quite hard for Singaporeans for they had experience and economic recession but the country had been doing good since 2010.
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