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