Singapore’s economy contracted last quarter as manufacturing eased, and the central bank said it will widen the range its currency can trade in to absorb greater volatility in global financial markets.

Gross domestic product shrank an annualized 19.8% in the third quarter from the previous three months after climbing a revised 27.3% in the April-to-June period, the trade ministry said today. The median forecast of 19 economists surveyed by Bloomberg News was for a 15.7% contraction.

 

Asian nations from Thailand to Japan have taken steps in the past month to cool the appreciation in their currencies, which is threatening exports at a time when global growth is slowing. Prime Minister Lee Hsien Loong has said Singapore’s economy may “moderate” in the coming months after a record first-half expansion, citing risks from the Europe and the U.S.

 

“Singapore is typically a bellwether for the region’s export outlook and it is the first to show cracks as global growth slows,” Alvin Liew, an economist at Standard Chartered Plc in Singapore, said before the report. Threats to Asian growth include “the fading impact of stimulus packages, stubbornly high unemployment rates and austerity measures that are likely to crimp consumption in the West,” he said.

 

The Monetary Authority of Singapore, which uses the currency rather than a benchmark interest rate as its main tool to manage inflation, said today it will maintain a gradual appreciation in the island’s currency, keeping the stance it adopted in April.