Singapore economy shrinks 4.1% from previous quarter in Q3, biggest fall since 2012

Singapore economy shrinks 4.1% from previous quarter in Q3, biggest fall since 2012

SINGAPORE - Singapore's central bank on Friday held policy steady despite a surprisingly sharp economic contraction in the third quarter, but analysts say the weak inflation and growth outlook will likely force policymakers to ease further.

Singapore's economy contracted by 4.1 per cent in the third quarter on a seasonally adjusted annualised basis, from the previous three months, the biggest slump since 2012, data from the statistics office showed. Forecasts had centred on 0.3 per cent growth.

The affluent city state's open economy has felt the brunt of a global slowdown and a downturn in commodity prices, while a cooling in Singapore's major trading partner China has put the shackles on the domestic manufacturing sector.

After a brief bounce, the Singapore dollar quickly turned lower, falling as much as 0.4 per cent to 1.3865 against the US dollar, nearing a seven-month low set on Thursday, as traders took stock of the grim gross domestic product numbers.

Despite the weak GDP figures, the Monetary Authority of Singapore (MAS) said in a statement it would keep the width of the policy band and the level at which it is centred unchanged, maintaining the rate of appreciation of the Singapore dollar policy band at zero per cent. "The current policy band provides some flexibility ... to accommodate the near-term weakness in inflation and growth," the MAS said in its semiannual policy statement.

5 things Singaporeans should do in the economic slowdown

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    The gloomy outlook in 2016 is expected to result in higher retrenchment figures, a slowdown in employment and horrible news for a whole bunch of industries.

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    NTUC has spoken: They predict that in the first quarter of 2016, 234 workers in unionised companies could be retrenched, a 31 per cent increase from the first quarter of 2015.

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    No matter how useful you think you are to your company, there's a chance your boss thinks of you, yes you, as an unnecessary cost-especially if he can just dump all your work on the guy in the next cubicle.

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    Job hopping is nothing new in Singapore, and while the employment market is still pretty robust, don't quit without another job lined up unless you're okay with the fact that it's probably going to be harder to find a new one than it was last year.

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    Employers are going to find it harder to justify hiring a new guy, so you definitely don't want to be job hunting desperately at that time.

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    If you're a business owner and haven't bothered correcting certain inefficiencies, this is the time to do it, as you could be in for some tough times.

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    While businesses across the board are likely to feel the pinch, if you're in particularly vulnerable industries like tourism and manufacturing, now is the time to see if there are more efficient, more streamlined and cheaper ways to do what you do.

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    Even if you don't find yourself unceremoniously retrenched, if your company is badly affected you can expect a smaller (or even no) bonus, as many people did during the 2008 recession, or even a pay cut.

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    This is not exactly the best time to start a designer bag collection or plan a lavish shopping trip to the factory outlets in California.

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    Everyone's investment mix is different, but if you're a stock investor who buys and holds for the long-term, this may be a good year to monitor stock prices more closely.

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    At this point, many stocks are quite heavily undervalued, and property prices are still on the decline. It's anyone guess when they'll rebound, but for now, investors should pay attention.

But a number of analysts expect the MAS would be forced to ease in coming months. "The bigger story is that GDP was very, very weak," said Michael Wan, economist at Credit Suisse in Singapore.

"MAS risks being behind the curve. They should ease - inflation is low, growth is slow and slowing and it looks like it's not going to improve anytime soon."

Particularly worrying for economists, the manufacturing sector shrank 17.4 per cent, due to a decline in transport engineering and the volatile biomedical sector. Even the once-vibrant services sector contracted for the third consecutive quarter.

The MAS manages monetary policy by changes to the exchange rate, rather than interest rates, letting the Singapore dollar rise or fall against the currencies of its main trading partners based on its nominal effective exchange rate (NEER) because trade flows dwarf the city state's economy.

Sixteen of 18 analysts in a Reuters survey had predicted that the MAS would keep monetary policy unchanged this month. In April, the central bank unexpectedly eased policy.

SIGNS OF SLACK

Economic growth in the city-state has remained anaemic in the past two years and analysts worry about the paucity of catalysts to spark momentum any time soon.

Entire floors at central shopping malls are vacant as weak domestic demand has hurt retailers while a slowing global economy has meant tourists have less money to spend.

No tenants, and no shoppers

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    Empty shopfronts and hoardings are not what you would expect to see at newly renovated shopping complexes, and even less so along Singapore's premier shopping street.

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    Yet that is what you will find when you walk into many of the malls in town.

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    From Orchard Road to the Marina Bay area, malls are struggling with too much retail space, as landlords scramble to attract and retain tenants.

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    This dire retail pickle has made hoardings with stock phrases "Working to serve you better" and "A new shopping experience awaits" the default decor in many malls.

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    It is a classic chicken-and-egg situation. Empty and boarded-up spaces give a poor first impression and attract few customers. Low footfall is bad news for existing tenants and fails to attract new ones.

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    At Shaw Centre, which reopened in 2014 following a massive renovation, about half of the units in the five-storey mall are behind colourful hoardings displaying contact details for leasing inquiries.

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    Next door at Pacific Plaza - once home to Tower Records and fashion brands Miu Miu and Prada - the same dismal scene beckons. Save for an Adidas Originals store, all units on the ground floor are vacant.

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    Stretches of vacant units can be seen in Claymore Connect, the former Orchard Hotel Shopping Arcade. It reopened last October after a revamp and two F&B units have already opened and shuttered in the four- storey mall.

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    Millenia Walk's management says the mall has increased occupancy by more than 20 per cent in the last year and is on track to achieve its occupancy goal of more than 90 per cent by the end of the year.

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    Potted plants are used to fill up space on level two, where there appears to be more empty units than occupied ones.

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    The entire section where Harvey Norman used to be has been cordoned off. A fitness and performance centre is slated to take over the space in October.

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    Bank executive Melissa Tan, 31, who works at one of the nearby office towers, says she goes to the mall for lunch with her colleagues. "Apart from the food, there's nothing much for me to buy or see here."

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    Over at Suntec City, a $410- million redevelopment plan, which took three years to finish, does not seem to have attracted enough tenants to fill up the vast expanse of retail space.

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    One section between Towers 2 and 3 on level three is almost a deadzone. Kiddy rides fill some of the empty spaces.

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    Vacated shops have paper crudely pasted over their signboards and some tenants seem to have left hastily, leaving behind store furniture and display shelves.

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    A store assistant at a furniture shop on that level, who wants to be known only as Mr C. Ho, 38, says he has seen tenants come and go in just the six months that he has been working there.

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    With The Centrepoint currently undergoing renovations, bright red and white hoardings can be seen on nearly every level.

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    While the boards feature happy faces and mouth- watering food pictures, they also make the place feel like a building in stasis.

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    Orchard Road has been especially hard-hit by a dip in tourism spending, which declined 6.8 per cent to $22 billion last year.

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    At Orchard Central, tenant Michael Chen, 35, says: "From levels one to four, there're so many hoardings because of renovation, it's like a dead mall."

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    The renovations are scheduled to be completed later this year. The shops on the lower levels are open for business, but the hoardings make these stores more difficult to find.

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    The many hoardings also give the impression that the entire mall is closed for renovation.

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    A salesman at a boutique on level five, who declines to be named, says: "Sales have dropped by more than 50 per cent since the renovations started."

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    "People think the mall is closed. Especially tourists. When shoppers see that level two has so many hoardings, they don't go to the higher levels."

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    Walking around Wisma Atria, the units are fully filled at basement one and there is a healthy crowd at Food Republic on level four.

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    But levels two and three are rather quiet, after department store Isetan closed last year. It is in the midst of renovations and leasing out the space.

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    From now till June 30, level one where Isetan used to occupy, is taken up by a pop-up flea market by Workshop Element (W.E.) and Togetherly.

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    Though the higher levels of the mall are mostly filled with various tenants that include fashion outlets, jewellery stores and hair and nail salons, the first level of Far East Plaza looks almost deserted.

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    While levels two through five have the odd handful of shuttered units, level one has at least 20 empty units.

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    The only busy spaces on the level are the F&B outlets which include bubble tea store Gong Cha and noodle restaurant Eat.

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    In spite of the many vacant units and stretches of hoardings, landlords contacted say their malls have a healthy occupancy rate: Mandarin Gallery says it is 94 per cent occupied while Orchard Gateway is 98 per cent occupied.

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    But tenants tell a different story. A tenant who wants to be known only as Mr Ho, 52, has a store in basement two in Orchard Gateway. "We see fewer than 10 walk-ins a day. Some days, we don't even make any sales."

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    At Mandarin Gallery, there are many empty units on levels two and three. Some have concrete flooring showing, while others are dusty. The busiest-looking areas of the mall are the rest areas, where the couches are usually fully occupied.

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    Landlords are trying various ways to fill quiet aisles, from offering space to pop-up stores to cutting rentals. Orchard Gateway and Orchard Central offer some tenants rental rebates of between 20 and 30 per cent a month.

Most industries face a labour shortage exacerbated by immigration curbs and wages are running well ahead of productivity. Vacancies in office and residential buildings hit multi-year highs.

The downturn in commodities has hurt the offshore and marine industry, with debt woes engulfing companies such as Swiber Holdings Ltd, Swissco Holdings LTD and Rickmers Maritime.

Even the financial industry, which has put the tiny 51-year-old island city on the global map, is under pressure as its once-booming private banking sector struggles under tougher compliance rules.

The services sector contracted 1.9 per cent in the third quarter. The MAS expected 2016 economic growth to come in at the lower end of the 1-2 per cent forecast.

Medium-term core inflation was seen trending towards, but average slightly below 2 per cent, while all-items inflation has bottomed, it said. "Our base call ... is that we will get a re-centering in April," RBS economist Vaninder Singh said, referring to a possible one-off depreciation of the Singapore dollar.

Brands that have left the Singapore retail scene

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    Retail developers in the current climate are feeling the brunt of the age of internet-shopping. It is not uncommon now in central Singapore to walk into a shopping mall devoid of crowds and anchor tenants of international brands.

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    1. iwannagohome

    The furniture and home decor store, which first opened in 2007, is in the process of winding down its two outlets in Tanglin Mall and Great World City. A spokesman cited that the closure was due to "the company bringing in new concepts".

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    2. Francfranc

    Lifestyle and furnishings retailer Francfranc joins the list of Japanese franchises which failed to maintain a foothold on the local market.

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    3. Goods of Desire

    Another lifestyle and furnishings retailer who has disappeared is Goods of Desire. Hailing from Hong Kong, all their items were stylized with heavy oriental influences to appeal to the East Asian market.

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    4. Parco

    After raking in millions of dollars in losses, Parco shuttered down its 83,000 square feet premise at Millenia Walk in February 2014.

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    4. Parco

    One of their last great projects was to provide a space, Parco Next Next, for emerging local designers to set up shop and promote themselves.

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    5. Celio / New Look

    These two stores always came in a pair in malls. Both brands are by distributor Jay Gee Melwani Group, and are expected to close within the second half of the year.

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    5. Celio / New Look

    Celio, a French menswear brand, and British brand New Look, have been having closing down sales in the few stores they have left since late last year.

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    5. Celio / New Look

    Managing director R Dhinakaran mentioned that all the outlets were not meeting sales targets and operating costs were getting too high, while also mentioning stiff competition with e-commerce.

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    7. Lowrys Farm

    Three years into their venture here, Lowrys Farm closed all eight of their outlets just a day shy of Chinese New Year in 2015.

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    7. Lowrys Farm

    The closure was due to the stores not meeting enough sales because of "climate difference and fashion taste". As entrants such as H&M finally making their way to our shores, brands such as Lowrys Farm took a beating in sales as their products are much pricier.

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    8. Raoul

    Though they held a promising position as one of Singapore's top fashion brands, Raoul shut down its last store in Paragon back in February this year.

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    9. M)phosis

    Another local fashion label which has disappeared is M)phosis. Like Raoul, they were touted as one local label to look out for and they shocked local designers with the news of their closure.

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    10. Comics Connection

    Now just a remnant in the memories of 90s Singaporean kids, Comics Connections was the place to get the latest comics, trading cards and games.

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    10. Comics Connection

    For 23 years, this family-run business and its founder Mr Felix Yeo stocked translated versions of popular Japanese manga in his stores, along with anime merchandise. But with the advent of online comics and higher rentals, his store was badly hit.

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