SINGAPORE, Jan 21 (Reuters) - Singapore's government warned that the country is in its worst recession ever and slashed its 2009 growth forecast for the second time in just three weeks after disappointing fourth-quarter growth, leading economists to expect monetary policy easing.
The Southeast Asian country expects its 2009 gross domestic product -- the value of all goods and services produced -- to contract between two and five percent this year as trade is forecast to plummet by a fifth.
Following are some comments from central bank and government officials to journalists on Wednesday:
ONG CHONG TEE, DEPUTY MANAGING DIRECTOR, MONETARY AUTHORITY OF SINGAPORE
MONETARY POLICY
"Our monetary policy schedule remains unchanged, meaning the next monetary policy statement will be made in April and our monetary policy stance is intact.
"You may remember that at the last policy statement in October we shifted to a neutral policy stance, anticipating the sharply deteriorating economic environment and also the fact that CPI inflation, which was still at high levels then, was likely to peak and decline going forward.
"Key consideration in determining whether further monetary easing is necessary at this stage is really the nature of the slowdown in economic activities. And this current slowdown reflects a sharp decline in global external demand and not an erosion of competitiveness. And therefore there is no reason, in our view, for any persistent weakening of the Singapore dollar. Indeed monetary policy in Singapore is formulated with a medium term orientation in mind and this 'anchor of stability' role is an important one, particularly at a point like this, given the turbulent business environment. One may argue that a sharp decline in the Singapore dollar could also affect businesses and purchasing power. We will conduct the monetary policy review in April as per schedule. So the short answer is: the monetary policy stance is intact."
FISCAL MEASURES
"It is probably fair to say that in terms of managing business costs or mitigating business costs a mix of wage and fiscal measures may be more appropriate than a fairly blunt instrument like using the exchange rate."
RAVI MENON, SECOND PERMANENT SECRETARY, MINISTRY OF TRADE AND INDUSTRY
RECESSION
"The Singapore economy is going through its sharpest, deepest and most protracted recession.
"Assuming further contraction in the first quarter of this year, the cumulative contraction in the economy since the first quarter of last year would be the largest to-date.
"What took us by surprise and most forecasters by surprise is the depth of the deterioration in global economic activity and, second the spillover it has on the region and Singapore. Typically you do not see this kind of collapse in trade so early in the cycle.
CREDIT ACCESS
"The main problem for businesses and the economy of course is the collapse of external demand. That is accentuated by difficulties that some of them have with regard to accessing credit.
"The role of the government is not to replace to banking system or to skew bank lending decisions. That will be disastrous. Rather the role of the government is to come in at the margins to make sure that financing is available to companies that are inherently solvent and fundamentally sound." (Reporting by Jan Dahinten & Saeed Azhar)