1.

1999 began on a sombre note, our economy having just contracted by 1.6 per cent in the second half of 1998. With a highly uncertain outlook, we braced ourselves for a difficult year ahead.

2.

As it turned out, 1999 was a year of remarkable economic turnaround. After a modest 0.8 per cent growth in the first quarter, the economy rebounded strongly for 3 consecutive quarters, recording a high of 7.1 per cent growth in the last quarter. For the whole year, we enjoyed a respectable 5.4 per cent growth. The Asian economic crisis is largely behind us.

3.

Singapore's V-shaped recovery benefited first from the strong upturn in global electronics. In particular, global semiconductor sales rebounded by a robust 17 per cent in 1999, after having contracted 8.4 per cent a year ago. This surge in external electronics demand provided a fillip to our manufacturing sector, and contributed to its stellar 14 per cent growth last year.

4.

The second boost to our recovery came from the concurrent turnaround in the regional economies. Buoyed too by the rebound in global electronics demand and stabilised regional currencies, most Asian economies returned to positive growth by the second quarter of 1999. This boosted intra-Asian trade and further fuelled Singapore's growth, as intra-regional trade accounted for about half of our total trade. Region-dependent services like tourism also benefited from the 14 per cent surge in visitor arrivals last year from our key Asian markets.

5.

One critical factor which enabled Singapore to seize the opportunities presented by the rising external demand was our improvement in cost competitiveness. In particular, the 10 percentage point cut in employers' CPF contribution rate and the wage restraint last year made a significant difference. They helped to lower the unit labour cost of the economy by 10 per cent and the unit business cost of our manufacturing sector by 12 per cent last year.

6.

In line with the strong external demand, domestic demand gradually recovered, helped by 2 main factors. First, job losses moderated. Last year, the total number of retrenched workers fell to 14,600, about half that in 1998. In fact, many companies have begun to rehire by third quarter 1999 as employment levels increased.

7.

In line with the strong external demand, domestic demand gradually recovered, helped by 2 main factors. First, job losses moderated. Last year, the total number of retrenched workers fell to 14,600, about half that in 1998. In fact, many companies have begun to rehire by third quarter 1999 as employment levels increased.

8.

Collectively, increased job security and the wealth effect in the asset markets renewed consumer confidence and boosted private consumption spending by 6.2 per cent last year. Against a healthier backdrop of aggregate demand, the Consumer Price Index rose marginally by 0.4 per cent.

9.

Although the economy has largely turned around, not every sector has recovered. The construction sector remained in recession; it contracted a severe 12 per cent last year, compared to a growth of 4.4 per cent in 1998. Due to the oversupply in residential and office properties, contracts awarded had continued to decline. Dragged down by weak commercial lending and poor regional demand for funds, growth in the financial services sector was flat last year. Growth in the business services sector was also feeble, at only 0.1 per cent due to poor real estate earnings.