Singapore economy holding up despite global downturn

Source : Straits Times - 26 Jun 2008

Minister highlights growth figures and trends that point to better days ahead

SINGAPORE’S economy is healthy despite slowing global output, the worst inflation in two decades and a strong local currency that has made its goods more expensive abroad.

That is the word from Trade and Industry Minister Lim Hng Kiang, who is on a four-day visit to New Delhi and Mumbai.

He told The Straits Times: ‘Overall, we are taking the current downturn in our stride. Despite the global downturn, Singapore is doing reasonably well.’

Exports dropped 10.5 per cent last month from a year earlier, the extent of the plunge catching most people off-guard. Pharmaceutical shipments declined 48.5 per cent, while the critical electronics exports fell 8.5 per cent, led by a 12.6 per cent decline in semiconductor shipments.

Some economists have cited the rising Singapore dollar, blaming it for eroding export competitiveness. The currency traded yesterday at 1.3684 to the greenback, an increase of 5.1 per cent since the year began.

But Mr Lim pointed out that while Singapore’s exports may have become dearer, the stronger Singdollar has helped companies buy many of their components at cheaper prices abroad.

‘Overall feedback from companies is that they are still managing with the stronger currency,’ he said.

‘The fact that the economy is still growing at between 5 and 5.5 per cent shows we have not over-calibrated the Singapore dollar.’

Mr Lim also took heart from several trends that pointed to better days ahead.

For example, Singapore’s electronics sector has been put through major restructuring.

Disk drives, once its mainstay, have been replaced by the wafer fabrication industry, which is attracting new investments by the day.

Precision engineering firms that served disk-drive factories have now turned their attention to other industries such as medical technology, aviation and high-end electronics.

Petrochemicals also continued to draw fresh investments.

‘Most of the hard changes are behind us and we look forward to reaping the benefits,’ Mr Lim said. ‘We should not take last month’s export numbers as an indicator of a long-term trend.’

Similarly, he was also optimistic that Singapore would be able to bring inflation under control by the end of the year.

Inflation hit 7.5 per cent last month, the highest in more than two decades, because of higher food, housing and transportation costs.

Mr Lim noted that Singapore had made the hard adjustments in time.

While some countries had tried to stanch the impact of higher prices of imported food and fuel through unrealistic subsidies, Singapore tended not to follow that path.

‘There are some transitional effects that will tail off by the end of the year, such as the effect of the higher goods and services tax we introduced last year,’ he said.

‘With some of these domestic factors removed, we will still feel the impact of external factors, but their magnitude will come down.’

COPING WELL

‘The fact that the economy is still growing at between 5 and 5.5 per cent shows we have not over-calibrated the Singapore dollar.’ - MR LIM, on the stronger Singdollar