Friday, July 14, 2006

Slower Quarter Growth = More Bankruptcies?

Seems our economic activities have slowed down...

July 14, 2006, 11.08 am (Singapore time)
S'pore June bankruptcies rise to 3-month high

SINGAPORE - The number of new bankruptcies in Singapore jumped to a three-month high in June, rising by 4.7 per cent from a year ago and reversing the previous month's fall, Government figures showed on Friday.

June's bankruptcy orders - including those filed by companies and individuals - rose to 267, from 255 a year ago, the Ministry of Law's website showed.

The total number of undischarged bankrupts as of June 30 was 24,138.

Analysts say bankruptcies are a lagging indicator of economic activity.

Growth in the trade-dependent economy slowed sharply in the second quarter to an annual rate of 1.1 per cent, slower than the 7.0 per cent clip in the first quarter, as manufacturing output cooled.

Under the law, a person can be made a bankrupt by the High Court for debts of
S$10,000 (US$6,337) or more. -- REUTERS

Tempting to take this as a quick answer.

However, it seems strange... If you analyse the article, it says that the "economy slowed sharply in the second quarter". Second quarter meaning April to June. For those in the know, it is extremely unlikely that a person would be made a bankrupt in a short period of 3 months. Firstly, it takes 1 month to have a late payment... the first reminder comes from the bank, nice and friendly. The second month passes, a less friendlier letter comes... then a third month... and you get a call from the assigned collections officer... Although I'm not personally involved, I reckon that it takes at least 6 months before drastic action is taken by the bank.

Instead, do you think it could possibly be due to easy credit... especially for the lower income groups?


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