SINGAPORE: While initial reports are revealing Singapore's economy looks like it shrank in the third quarter, the government and economists are optimistic that the country will avoid a recession. The weakening local economy here is largely the result of poor global demand for manufacturing exports. Economists expect the Central Bank on Friday to ease policy. Prime Minister Lee Hsien Loong said that he is confident the city-state will avoid being the first major Asian economy to fall into recession this year as there are positive job numbers in the city. According to the median estimate of 16 economists polled by Reuters, Singapore's GDP likely shrank a seasonally adjusted and one percent quarter-on-quarter in July-September, worsening from the 0.7 percent drop that had been reported for April-June. The country's inflation slowed to its lowest in two years in August as the global economy continues to be weakened and saw reduced pressure for price increases. The inflation drop also gives the city-state's central bank more mobility to ease monetary policy next month. The consumer price index is expected to rise 3.6 percent in August from a year earlier, down sharply from July's 4.0 percent, according to the median estimate of 11 economists polled by Reuters news agency. If accurate, it would be the lowest it has been in the country since October 2010, when it was reported at 3.5 percent. The core inflation measure, which excludes housing and private car prices, probably rose 2.3 percent year-on-year, slowing from July's 2.4 percent. The Monetary Authority of Singapore (MAS) looks more closely at the core figure when setting policy. “Headline inflation probably eased to 3.6 percent in August, helped in part by a high base last year for transport and housing," Bank of America Merrill Lynch said in a note to clients. “The lower inflation reading will likely give the MAS room to ease policy at the October meeting." Singapore's economy shrank less than anticipated in the second quarter, thanks to a surge in pharmaceutical production in June, gross domestic product (GDP) data showed last month. Economists have told Bikyamasr.com they expect the Southeast Asian city-state's gross domestic product to grow 2.4 percent this year, down from a median estimate of 3.0 percent three months earlier, the central bank's latest quarterly Survey of Professional Forecasters showed.
