We cannot repeat the exceptional performance of 2000 this year. While the overall outlook for 2001 remains fair, we must be prepared for slower growth.

External economic prospects have become less rosy. The US economy has decelerated quite sharply in the past few months. Poorer corporate results and weak stock markets have begun to feed through to slower consumption and investment. The chances of a hard landing have increased, prompting the Federal Reserve to cut interest rates by 100 basis points so far this year. The consensus is that the US economy will grow by only 2 to 2.5 percent this year. But if it turns out lower, we will be in for harder times ahead.

The Japanese economy is expected to remain weak this year. In fact, its recovery is showing signs of stalling. Household expenditure has remained anaemic due to job worries and continuing deflation. Japanese exports are already slowing on the back of weaker US demand. These could in turn dampen business investments.

Fortunately, growth in Europe should be able to provide some support for the slowing external demand. Although growth in Europe peaked last year, it should remain healthy at about 3 percent in 2001, underpinned by robust consumption.

Similarly, global electronics demand will moderate from its stellar growth of last year. Some industry watchers expect sales of semiconductors to slow significantly from the heady 31 percent growth last year to just 5-10 percent this year. But continued healthy demand in segments such as PCs and telecommunications products will provide some support for growth in the electronics sector.