Singapore faces an exodus of 200,000 foreigners as the financial services and manufacturing industries scythe through their workforces and the city-state grinds towards the worst recession in its 43-year history.

The expected exodus, predict analysts at Credit Suisse, could see the number of people living in the tiny but economically powerful island shrink more than 3 per cent to just 4.68 million by 2010 in a shift that would severely undermine the government’s 22-year efforts to boost the population through immigration.

A broad rule of thumb, said analysts at UBS in Singapore, is that nearly every new job created over the last few years went to a foreigner. The economic policies of the city state have overtly relied on its ability to attract talent and skills from abroad.

The departure of thousands of ex-pat bankers, lawyers and accountants between now and 2010 is expected to lead a secondary exodus of manufacturing, construction and service sector foreign workers.

Job losses will hit Singapore hard, said Credit Suisse economist Cem Karacadag, “because they affect more highly paid workers and could result in a semi-permanent drip in the population”. He added that the potential drop “would have far-reaching implications for the economy” including a possible sharp contraction in private consumption.

The knock-on effects of a Singapore exodus, some real estate analysts believe, could also see property prices fall by as much as 30 per cent from their current levels.

Credit Suisse’s grim population forecast comes amid warnings that among non-Japan Asian countries, Singapore’s open economy may be hit hardest by the global downturn. Consumption growth, said the report, could fall to almost zero.

Analysts at believe that the country’s GDP may contract by 2.8 per cent in 2009 as rising unemployment hammers domestic growth and the collapse of consumer confidence around the world hits exports.

Mr Karacadag raised a further red flag for Singapore’s economy by warning that there was a risk that forecasts were still underestimating the effects of a broad Asian downturn and further terrible news from the financial sector.

Singapore – the world’s busiest port by tonnage handled and the home of some of the world’s largest shipping companies - is already feeling the pain of an alarming slump in global trade.

With the credit crunch still affecting trade finance and the demand for Asian manufactured goods in acute decline, hundreds of container and dry-bulk ships now sit unneeded and at anchor outside Singapore. The stagnation, say brokers, is matched onshore.

In tandem with the warnings over a possible population crunch, concerns are growing among investors over the health of Singapore’s domestic banks. The “benign asset quality” environment in which Singapore banks have thrived, say analysts, has now reached an inflection point.

The ratio of non- performing loans is expected to rise sharply as the construction boom that has filled the Singapore skyline with towers and cranes begins to deflate.

Between 2003 and 2008, the population of the city state soared nearly 18 per cent in an increase driven predominantly by foreigners hired to meet Singapore’s endemic shortage of workers during the good times.

When global trade, investment banking and Asian stock markets were booming, Singapore successfully fashioned itself as a financial hub to rival Tokyo and Hong Kong and the expatriates flooded in – around 200,000 jobs were created in the financial and business services sector over the last four years.

A large number of jobs are expected to be lost in manufacturing, which accounts for about a quarter of Singapore’s GDP.

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