Depression..
..clouds hover
Lee Kuan Yew's feared 10% economic drop, if it materialises, could bring Singapore closer to technical depression. By Seah Chiang Nee
Mar 5, 2009

Minister Mentor Lee Kuan Yew’s grim warning of a possible 10 percent slide has placed Singapore’s recession close to a state of - depression.

So what is the difference?

Broadly, a depression is any economic downturn where real GDP (gross domestic product) declines by more than 10 percent.

A recession, however, is less severe - when it registers two consecutive quarterly declines.

That’s the general definition; there are, of course, other factors like consumption, trade, job losses, etc and frequently these definitions differ country to country.

Since a depression very rarely happens in the course of history few ordinary people are familiar with it.

Mr Lee, however, mentioned the 10 percent slide as a possibility if global demand on Singapore’s products and services continues into the second quarter of 2009.

This could happen if the Republic’s exports continue to drop at the same speed as they did earlier this year, he predicted. They fell 35 per cent in January.

Said Mr Lee: 'If the second quarter shows a further drop of another 30, 40 per cent, it (economic growth) will go down to -10 (per cent).'

Recently a bank economist said that Singapore’s economy was in a free fall.

The last depression in the United States was from May 1937 to June 1938, where real GDP declined by 18.2 percent.

So for now, the prospect of a depression in Singapore is still some way off.

In New York, some economists are predicting a 20 percent chance of US falling into depression.

Lee cautioned that Singapore cannot recover unless the West and the rest of the trading do so first.

Recovery, he said, “may be a short-bottomed V, it may be a long-bottomed V, it may be a long L, nobody can tell us what it's going to be at the moment”.

Mr. Lee added: “(But) when they do recover, we'll bounce back faster than anybody else because...three-and-a-quarter times our GDP is in external trade. So we just got to tough it out.”

The Minister Mentor’s comments are expected to widen the eyes of Singaporeans who are unconvinced that Singapore in a crisis.

As an online joke defining a depression, which goes like this: -

A recession is when your neighbour loses his job.
A depression is when you lose your job.

Following are some online discussions.

Comment

Looking at it through a peep-hole, America's recovery seems to be crucial to Singapore. However its present administration is out and out pro-people, protectionist concerns still not ironed out.
Their loose lending and free-spending credit culture may be tamed by new financial reforms.
And without trying to break any trade pacts this administration may take the whole (five-year) term to provide and please its people.
Therefore Singapore should not hold its breath waiting for US recovery, but should work with Asian partners for a moderate but sustained growth.
By gemini58