UPDATE 2-Singapore recession risk looms after August exports shrink

(Adds seasonally adjusted data from IE Singapore)

* Aug NODX falls 9.1 pct vs consensus of -1.8 pct

* Aug NODX falls 10.6 pct y/y vs consensus of 4.0 pct

* Recession risk increases following q/q decline in Q2 GDP

SINGAPORE, Sept 17 (Reuters) - Singapore's non-oil domestic

exports (NODX) in August fell more than expected, raising the

prospect of the city-state entering into a recession as exports

to the European Union plunged.

The trade-dependent Southeast Asian city-state said on

Monday non-oil domestic exports (NODX) fell 10.6 percent from a

year earlier, hurt by a 10.4 percent drop in electronics and a

28.7 percent plummet in shipments to the EU, its largest market.

On a seasonally adjusted month-on-month basis, NODX shrank

9.1 percent after contracting 3.6 percent in July.

Electronics exports contracted 14.8 percent in August from

July after seasonal adjustments, while non-electronics NODX

shrank 7.1 percent, trade agency International Enterprises

Singapore said in a separate email.

"Although our baseline case is not for a quarter-on-quarter

contraction, the chances are not minute. There is perhaps a

40:60 chance of contraction," said Oversea-Chinese Banking Corp

head of treasury research Selena Ling, whose estimate was the

closest among the 13 economists polled by Reuters.

The median estimate in a Reuters poll had been for non-oil

domestic exports to fall 4.0 percent year-on-year and 1.8

percent month-on-month.

Singapore's economy shrank less than anticipated in the

second quarter, thanks to a surge in pharmaceutical production

in June, gross domestic product (GDP) data showed last month.

But the government warned of continued uncertainties and

downside risks and narrowed its 2012 growth forecast to 1.5 to

2.5 percent from an earlier 1-3 percent.

Economists expect the Southeast Asian city-state's gross

domestic product to grow 2.4 percent this year, down from a

median estimate of 3.0 percent three months earlier, the central

bank's latest quarterly Survey of Professional Forecasters

showed.

Singapore's weaker-than-expected trade data follows signs of

a slowdown elsewhere in the region, with a survey on Monday

showing New Zealand's services sector slowed for a third

consecutive month in August to a two-year low. South Korea said

on Monday retail sales fell for a third straight month in

August.

MONETARY POLICY

Looking ahead, economists said the weak August trade data

reinforced the widely held perception that the Monetary

Authority of Singapore (MAS), the country's central bank, will

likely ease monetary policy slightly in October by slowing the

local dollar's rate of appreciation.

"With these kinds of numbers, growth momentum appearing to

slow down and inflation less of an issue, MAS could look at a

gentler slope of appreciation," said CIMB regional economist

Song Seng Wun.

Singapore sets monetary policy by allowing its dollar to

rise or fall against a undisclosed basket of currencies. When it

issued its last policy statement in April, MAS said it would

allow a modest and gradual rise of the Singapore dollar with a

slightly sleeper slope of appreciation.

OCBC's Ling warned, however, that MAS along with its

regional peers would be cautious about easing policy too rapidly

given the risk of asset appreciation fuelled by the U.S. Federal

Reserve's latest round of quantitative easing.

"Asian central banks are worried about the QE side of things

and what it may do to asset inflation," she said.

(Reporting by Kevin Lim; Additional reporting by Charmian Kok;

Editing by Jacqueline Wong)

Source: http://news.yahoo.com/1-singapore-recession-risk-looms-august-exports-shrink-014825231--business.html

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