S’pore economy faces dark storm clouds: PM

Source : Business Times - 30 Apr 2008

The United States is probably in a recession and the Singapore economy will be more severely affected if the turmoil in global financial markets worsens, Singapore’s prime minister said on Wednesday.

The Southeast Asian country was ready to respond if the situation in the United States worsens, said Lee Hsien Loong in a statement to mark May Day.

‘Dark storm clouds have gathered… A US recession has probably already started,’ Mr Lee said.

‘We must watch closely how the situation in the US unfolds, and be ready to respond if things take a turn for the worse. We have the resources and the ability to do so.’

Mr Lee acknowledged that the rising cost of living in the Republic was a major issue but said Singapore could not be completely insulated from rising global inflation.

‘We need not worry about a food shortage, because we have adequate supplies, and can buy what we need from many sources,’ he said.

Mr Lee said that the central bank’s policy to allow the Singapore dollar to rise had moderated the impact of imported inflation.

Singapore’s central bank earlier this month tightened monetary policy by allowing a rise in the Singapore dollar, its main policy tool .

Inflation in the city-state accelerated to a 26-year high of 6.7 per cent in March. The central bank expects inflation to hit the upper-end of a 4.5-5.5 per cent range this year, although some economists said inflation for the year could average 6 percent.

Mr Lee reiterated the government’s official forecast that the economy would grow at 4-6 per cent this year.

Booming construction, tourism and marine engineering will help lessen the impact of a US recession on Singapore, he said.

Mr Lee also said the labour market would remain tight, and that more jobs will be created as the country builds two multi-billion dollar casinos, the first of which is set to open late next year.

Singapore’s unemployment rate rose to a seasonally adjusted 2 per cent in the first quarter amid mounting uncertainties in the global economy, advance government estimates showed on Wednesday, and analysts warned the jobless rate may climb higher in the months ahead. — REUTERS