Who Needs the MTI? Mr Wang's Readers Are Cleverer

Maybe minus 10%:
MM Lee GIC portfolio also takes a hit, down 25 per cent from peak
Thursday • March 5, 2009
Christie Loh deputy business editor christie@mediacorp.com.sg

MORE than just a numbers game, worsening projections of Singapore’s economic growth are showing just how closely tied the country’s fortunes are to global goings-on.

Painting the most dismal outlook thus far by a Government official, Minister Mentor Lee Kuan Yew yesterday said the economy could shrink by an unprecedented 10 per cent, should international trade continue to falter.

“PSA cargo’s gone down by 30 per cent. So, we immediately shifted our expectations from minus 5 to minus 8,” he told corporate leaders at an hour-long dialogue organised by news information firm Thomson Reuters.

“If the second quarter shows a further drop of 30 to 40 per cent, it might go down to minus 10,” said the Minister Mentor.

Prime Minister Lee Hsien Loong had last week said the economy could shrink by 8 per cent, after the Government’s forecast in January of a worst-case 5 per cent contraction.

This is pretty scary, considering that in January 2009, the Ministry of Trade & Industry's forecast was around +1% to -2%. Just one and a half months later, Hsien Loong is saying -8% and Kuan Yew is saying perhaps even -10%.

Yet was it really that unpredictable? Ahem. In January 2009, one of my readers, who calls himself "The", was already pointing at the figure -10%. Back then, he had left the following comment on one of my posts:

"Looks like the perfect storm is brewing for the Singapore economy. The economists at the MAS/MTI, even if they are cognizant, are unlikely to put up a realistic forecast for fear of panicking the people.

The private sector economists are too polite or too kiasu to go against the official forecast.

Let me, a non-economist, cast the first stone and stone the first cast-in-stone forecast. The composition of Singapore's GDP (2007) is as follows:

Manufacturing 23.7%
Financial & Biz Services 24.6%
Wholesale &
Retail Trade 16.0%

These 3 sectors alone account for some 64.3% of Singapore's economy.

Given the global financial tsunami and contraction in trade, it is realistic to assume a contraction of 15% in these sectors, which means GDP shrinking by 9.6%. Assuming a more conservative contraction of 10% for the 3 sectors, GDP will shrink by 6.4%.

So, my quick and dirty forecast for Singapore's 2009 GDP growth - a decline of 6.4% to 9.6%. Let's take the mid point -- minus 8.0% GDP growth for 2009.

And the official MTI forecasters are still mucking around -2% to +1% growth for 2009.You heard it here first - from a non-economist.

20 January, 2009 15:59"

Another one of my readers (he was "Anonymous") left the following comment, also back in January 2009. The reference in his first paragraph was to a Credit Suisse report predicting 300,000 job losses in Singapore, in 2009:

"Mr Wang,

DOS has just calculated that the latest monthly wage in Spore is S$2,500.00,so if 300,000 get the walking tickets,straight away 4% off the GDP,should be more as of the remaining employees,many are getting up to 30% wage reduction.

Traditionally,corpoare profit accounts for close to 50% of our GDP,and under averge recession,corporate profit should decline by 20%,this round the decline should definitely be much higher.

Even a 20% reduction means another 10% drop in GDP.

Minister Tharman & PM Lee have both grossly under estimated the seriousness of the current situation."

Remember, you read it here first, on Mr Wang's blog. Sure, LKY will tell you the same thing .... much later.