Despite last year’s growth, Singapore remains concerned about a potential “disorderly” European debt default and its impact on the economy.
GDP increased 10% in the past three months, while the estimate was set at 9.9% according to the Trade Ministry.
Unlike other Asian policy makers, Singapore narrowed its strategy this spring in an effort to blunt strengthening price pressures. Europe’s debt conflict appeared to have been on the mend, but certain government struggles in countries such as Greece have proved a setback in the process.
“The developments in Europe pose a significant downside risk to Singapore’s economy,” says Nomura Holdings’ Euben Paracuelles. “It’s hard for Asia to escape the repercussions if there’s a European recession and it’s accompanied by financial market instability and a banking crisis.” He added that the growth outlook for Singapore during the third quarter is “very poor.”
Ben Bernanke, U.S. Federal Reserve Chairman, recently stated that the Eurozone debt crisis has significantly impacted the United States’ trade and financial markets.
“The European Union accounts for roughly one-fifth of U.S. exports of goods and services. The U.S. exports to Europe over the past few years have underperformed our exports to the rest of the world,” Bernanke testified before the House Committee on Oversight and Government Reform.
“In addition, weaker demand from Europe has slowed growth in other economies, which has also lowered foreign demand for our products,” he said.
The financial markets have also taken a hit, according to Bernanke. Risk of the crisis spreading still lingers, though financial firms and markets have used this time to adjust their strategies and risks throughout the developing situation. European officials also managed to alleviate some of the stresses in the region, improving the global approach and strengthening markets everywhere.
“However, Europe’s financial and economic situation remains difficult, and it is critical that the European leaders follow through on their policy commitments to ensure a lasting stabilization,” Bernanke said.
In the month of October, the U.S. economy added 80,000 jobs, and unemployment rates fell slightly, from 9.1% to 9.0%, revealing that while the going is slow, the world’s greatest economy is on a stable path to recovery.
Furthermore, the economy did not falter in the face of August’s incidents, including the downgrade to the US credit rating and the EU debt crisis. Still, the pace of recovery remains slow.
The revisions of the past few months reveal the risk of depending on the initial employment data.
“You want to see revisions to the upside if one expects firming labor conditions. Weaker labor markets normally create downward revisions. The trend is moving in the right direction,” said Eric Green of TD Securities in New York.