Looking ahead, it is difficult to predict precisely the immediate economic outlook for Singapore. The regional context is too volatile and fraught with uncertainties. Further, political, social and economic changes can trigger off new discontinuities, and render past trends irrelevant. What we can do is to assess the economic outlook based on the current situation, assuming there are no drastic developments.

The Singapore economy is expected to feel the full impact of the regional economic crisis this year. The latest business expectations survey results indicate that nearly all major sectors expect weaker business conditions for the next 6 months. The Composite Leading Index, which leads economic activity by about 9 months, has been slowing down since September.

Growth in the financial services sector is likely to moderate significantly. The Asian Dollar Market, one of the key financial growth engines, will slow considerably. With the risk premium for the region having risen significantly, financial institutions are adopting a wait-and-see stance before committing any new loans to the region. Activity in the foreign exchange and stock markets are also expected to moderate from the high levels in the second half of 1997.

The commerce sector has already registered early impacts from the regional crisis. Entrepot trade will moderate as import demand from regional countries for consumption and capital goods slows. The other domestic segments within commerce will also not be spared. The tourism and retail trades are already seeing slower tourist arrivals and consumer spending, with no immediate prospects of a pickup.

The transportation sector, especially our air and sea ports, will also be adversely affected by the fall in tourist arrivals and regional transhipment activities. However, the telecommunications sub-sector should continue to expand, albeit at a more moderated pace.

In manufacturing, the continuing robustness of our major export markets in US and EU will help to sustain growth. The US is enjoying an unprecedented stretch of strong growth accompanied by low unemployment and low inflation. The uptrend in US demand for electronics components since the second half of 1996 is continuing. Growth in the EU is also expected to remain firm. The healthy pipeline of investment commitments over the last few years will also contribute to additional industrial capacity in 1998. These positive factors will help our manufacturing sector, although we will still see some consolidation in industries where there is global over-capacity and keen competition.

Construction should see robust growth. Private residential developments are sluggish. But growth will be supported by the continued healthy pipeline of public sector infrastructure projects, including the North-East MRT line and public housing projects.

Under present conditions, the Ministry of Trade and Industry (MTI) expects the Singapore economy to slow down significantly, but not to the extent of going into a recession. MTI's economic growth forecast for 1998 is 2.5 to 4.5 per cent. MTI will continue to monitor future developments closely, and review its forecast where necessary.