After posting double-digit growth rates for four consecutive quarters, the nation's gross domestic product declined by 2.3 percent compared with the second quarter, the trade and industry minister said on Monday, Oct 11.

The economy expanded at a rate of 7.7 percent from the third quarter of 2003. That represented a slowdown from a year-to-year growth rate of 12.5 percent in the second quarter.

The government still predicts that the economy will grow 8 percent to 9 percent this year, and economists had been expecting some slowdown after the economy bounced back from the effects of the outbreak of severe acute respiratory syndrome, or SARS, in the first half of 2003.

But the sudden contraction left economists divided over Monday's data. While some said the economy was settling into a more sustainable stride, others said Singapore was succumbing to a downdraft in the global economy, with slowing growth in China and anemic job creation in the United States.

The dimmer global outlook was not only reducing export demand, they said, but was also dampening consumer sentiment across Asia.

The slowdown also brought into sharper relief Singapore's longer-term economic challenges. China's rise as a manufacturing giant has challenged Singapore's role as a high-tech manufacturing center, leaving more and more people out of work. "The economy is only generating half the number of jobs it used to," said Song Seng Wun, regional economist at G.K. Goh Research.

Singapore's government has responded by pushing industry to move into even higher levels of technological sophistication and prodding citizens to forsake an assembly-line mentality for more creative endeavors, biomedical research and entrepreneurial ventures.

Part of the nation's long-range planning involves reversing Singapore's declining birthrate. In addition to providing incentives for having children, the government has loosened restrictions on immigration, particularly for highly educated foreigners in key industries. Schools and universities are giving greater access to children of expatriates.

In the meantime, Singapore is trying to lure both tourists and residents by reversing its image as a boring company town. Censors recently lifted bans on the magazine Cosmopolitan and allowed a censored version of the television series "Sex in the City" to be broadcast here. A major casino is planned.

Pharmaceuticals are playing a major role in Singapore's economic overhaul, and planners have long been luring drug companies to base production and research here to offset a traditional dependence on electronics exports.

But success in attracting pharmaceutical investments has proved a double-edged sword. Drug plants employ relatively few people and cannot make up for the jobs lost in electronics manufacturing, economist said.

Drugs have also proved an unexpectedly volatile component of the economy, with growth rates rising and falling from one month to the next as drug makers halt production to clean out vats and prepare to produce a different drug. The ministry blamed this for slower growth in manufacturing in the third quarter.

The New York Times

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