The economy is heavily affected by global conditions

Adrian Foster Nomura Singapore

The export-led state blames slowdowns in Japan and the US for the drastic slowdown in its own growth.

The revision was sparked by the news that first quarter economic growth dropped sharply to 4.6% from 11% in the previous three months and 9.8% the previous year.

This led the government to downgrade its estimate for full-year growth to between 3.5 and 5.5%, compared to previous estimates of between 5-7%. The economy boomed by 9.9% during 2000.

Electronic faults

"It shows the economy is heavily affected by global conditions," said Adrian Foster, an economist at Nomura Singapore.

Singapore economic growth

Current growth estimate 3.5%-5.5% Previous growth estimate 5%-7% Growth in 2000 9.9% Q1 2001 growth 4.6% Q4 2000 growth 11%

The US buys about one quarter of Singapore's non-oil exports.

The Ministry of Trade and Industry also blamed the tough times hitting the global electronics sector.

Electronic goods account for about 50% of Singapore's manufacturing and some 12-13% of the overall Gross Domestic Product, with exports to the US and Japan making up 60% of total exports.

Analysts say there is little Singapore can do to offset the slowdown in the US and Japan.

Stock market blues

Despite the difficulties, the Monetary Authority of Singapore denied that it was changing policy to favour a weaker Singapore dollar in order to prop up declining exports.

And the Singapore stock market - already at a two year low - is bracing itself for the weak data to weigh on investments.

One option for the government is to bring forward some public sector construction projects to ease the downturn.

"The government is beginning to realise the momentum has decelerated quite sharply," said Lian Chia-liant, economist at Merrill Lynch.

He said that the economy may not start picking-up until the first half of next year.