SINGAPORE, May 29: Singapore faces the threat of slipping into its second recession in three years due to the heavy toll exacted by the Sars outbreak, US investment bank Morgan Stanley said on Thursday.

“Recession is looming on Singapore, in our view,” the bank’s Southeast Asian regional economist, Daniel Lian, said in a report, adding the “economy appeared to be decelerating significantly in the second quarter.”

The fallout from Sars, which initially affected the tourism and transportation-related sectors, looks to have also hit the goods-related industries, Lian said.

“Both manufacturing and merchandise export sectors have lost momentum in April and May,” he said.

Government figures released this week showed manufacturing output contracted an annual five per cent in April against expectations, raising fears the city-state was heading for a sharp downturn.

“The negative impact on the goods sector does not bode well for an economy that is already hard hit by the weakness of its services sector,” Lian said.

“We believe both goods and services sectors will contract to the tune of three per cent or more (in the second quarter),” he said.

Despite sounding alarm bells of a recession, the Morgan Stanley report said Singapore’s gross domestic product (GDP) was expected to grow one per cent in 2003.—AFP