Lower-income groups will receive more of the shares, he said, which can be redeemed for cash or held to yield a dividend each year and a bonus in bumper years. Goh unveiled the plan in his annual National Day Rally speech on August 19 but said details of the "New Singapore" shares scheme will have to wait until the release of third-quarter results later this year.

It wasn't the first time this year that the government has announced plans to help Singaporeans and bail out the economy. The shares scheme follows on the heels of a S$2.2 billion (US$1.2 billion) off-budget package of stimulus measures and extended tax breaks to help businesses and prevent further employment, unveiled on July 25.

With its export-led economy in recession and an election due in less than a year, times are tough in Singapore. The economy contracted 10.8 percent in the first quarter and by 10.7 percent in the second quarter--sending the economy into a technical recession (two consecutive quarters of contracting GDP). On July 10, the government slashed its economic growth forecast for 2001 to 0.5 percent -1.5 percent.

But many private sector economists are more pessimistic. Rajeev Malik, an economist at JPMorgan, predicts the economy will contract by 2.3 percent this year. If his grim forecast comes true 2001 will see the worst full-year contraction since 1964, when the economy contracted by 4.31 percent . (By contrast, in Singapore's 1985 recession, the economy contracted 1.6 percent.)

Except for financial services, all sectors registered slower growth in the second quarter compared with the previous quarter.

The sharp decline in demand for Singapore's electronics exports--which make up about two-thirds of the country's total non-oil domestic exports--has fed through to production. The manufacturing sector was down a hefty 9.6 percent in the second quarter from a year ago, the weakest growth since the fourth quarter of 1985 and sharply down from the double-digit growth it registered in 1999 and 2000. It fell an even sharper 28 percent from the previous quarter.

The third quarter certainly didn't get off to a very promising start, either. Singapore's non-oil domestic exports plunged by a year-on-year 24.2 percent in July, exceeding even the most gloomy market expectations. The fall follows a 16.9 percent drop in June.

Meanwhile, unemployment is rising while productivity is falling. The Ministry of Trade and Industry has said that as many as 5600 workers lost their jobs in the second quarter, taking the head count of those retrenched in the first half to 9000. The ministry is forecasting 20,000 job losses this year. Labour productivity fell by 5.5 percent in the second quarter after turning marginally negative in the previous quarter, while Singapore's unit labour costs for the manufacturing sector rose by a substantial 19 percent in the second quarter, following a 10 percent increase in the first quarter.

In July, the Monetary Authority of Singapore shifted to a neutral monetary policy amid mounting evidence that the collapse in global demand for electronics was worse than expected. But Chia Woon Khien, senior regional economist at European brokerage ING Barings, argues that if Singapore wants a less painful recovery, it should allow its dollar to weaken. If there is no sign of economic recovery by late this year, the Singapore dollar may be considered overvalued and fall under pressure, she says.