Singapore’s growth momentum to be sustained for 2010, say economists

Source : Channel NewsAsia – 1 Dec 2009

Economists from OCBC Bank expect Singapore’s economic growth momentum to be sustained for 2010.

OCBC said the economy is expected to grow 4 per cent in 2010 – at the mid point of the government’s official forecast of 3-5 per cent expansion.

However, concerns are mounting about asset bubbles and rising inflation.

The problems currently facing Dubai World have been isolated so far. But observers expect similar “speed bumps” to show up over the next few years, suggesting that the global economy is just slowly recovering.

For Singapore, OCBC said the economy is expected to grow on-year in the fourth quarter and at least in the first half of 2010, barring unforeseen events.

Economists said there is lingering policy concern on potential asset bubbles, including the property market. And they expect the opening of the two integrated resorts next year to generate more demand for homes from foreign workers and investors.

Selena Ling, Head, Treasury Research & Strategy, OCBC said: “Mainly because of the record low interest rates we are seeing in the G3 economies, a lot of money has been sitting on the side lines in the wake of Lehman Brothers.

“Obviously with the pick up in economic numbers, the risk appetite is coming back. They are all searching for yield and emerging markets like Asia, because we have been relatively less impacted by financial deleveraging process (and it) does look relatively attractive from a medium term point of view.”

OCBC said investors will continue to buy into the commodities and China growth stories. It said the key concern now is not a double dip but rising inflation and slow expansion, as energy prices and wages rise.

OCBC also expects the Singapore dollar to appreciate, if recovery in the economy and export stays on track.

“The countries that are highly exposed to the global export cycles, the Taiwan dollar, Singapore dollar, the Malaysian ringgit… (they) are expected to play some catch up in 2010, to other currencies that have strong domestic growth dynamics,” said Emmanuel Ng, Currency Economist, OCBC.

“So we do expect some catch up by the Singapore dollar next year, especially if the MAS tightens policy,” he added.

The Monetary Authority of Singapore is due to review its Singapore dollar policy in April 2010.