An optimistic outlook for the Singapore economy this year

Producer: Felix Tan
First broadcast: 2 January 04, Radio Singapore International

Advance estimates show that the Singapore economy's fourth quarter gross domestic product for 2003 has expanded by 3.7 percent, in real terms, over the same period in 2002.

A good external environment especially in the regional economies has benefited both the manufacturing and services sectors in Singapore.

Overall, the economy for 2003 ended on a positive note with a growth of 0.8
percent in real terms.

So, what are the sectors that are likely to shine brightly this year?

Felix Tan put this question to Mr Song Seng Woon (SSW), a regional
economist at GK Goh in Singapore:

SSW: "The Singapore economy is pretty straightforward to analyse. The growth areas always have been centred around whether we export more or whether we move people? So, it is always related to external trade in both goods and services. So, if we make more things to sell or more people use our ports and airport, I think Singapore's growth will shine. This year, I suppose, if we look at what we have been seeing over the last few months, we will likely see this extension of the growth drivers of the previous few months or so - manufacturing, it will be electronics, it will be disk drives, it will be semi-conductors. Hopefully, that starts to broaden into other manufacturing and hopefully, that also spills over to overall general manufacturing activities, which has been a bit sluggish because of the state of, partially because of the local economy. And I suppose, the services sector - I mean the hospitality-related sector - has, more or less recovered fully from the effects of SARS. But I suppose, with the domestic economy not showing broad-based recovery, mainly because of the job markets and employers still reluctant to hire aggressively, we will probably find the local economy may still lag behind the strengths of the external economy."

But what is the likelihood that Singapore's economic growth will be over five percent for the year 2004?Should we be more cautious in our forecast?

SSW: "Well, I suppose at this juncture, looking at the key indicators, particularly for the electronics industry, it does look like we will see fairly robust growth coming from the electronics sector. I mean, global chip sales have been expected to rise by 18-20 percent mainly on the strength of mainland China's demands. If that continues to rise on the upside, i.e. still continues to get strength from the European market or the American market, then we will see a significant upside to that. And that will certainly be reflected in Singapore's manufacturing, electronics in particular. And that, plus the low-base of 2003, particularly the second quarter of 2003, we could jolly well see growth exceeding the higher end of the government's forecast. Actually, we see it as quite likely because of that low-base we had in 2003."

Unemployment went up to six percent instead of maintaining at around 5 percent or 5.5 percent. Now, what is your prediction for the year 2004 then - are we going to see a higher unemployment rate or hopefully, a lower unemployment rate?

SSW: "Well, employment indicators always lack behind real economic growth.
I suppose the good news is if we look at the data thus far, we are seeing manufacturing or the services sectors starting to employ. We will only see them, I suppose, employ in a more aggressive manner if they start to see more signs of sustainable recovery. I think we are still a little behind that in that sustainable growth. So, I suppose it is understandable that manufacturers have not really been that aggressive. If we look at, say, the number of people registered with the Manpower ministry, looking for work, I think the signs have certainly been encouraging. From a peak of something like over 18,000 people registered with the MOM at the end of May, the number has now dropped to, I think, under 15,000 as at the end of October. Still, you know, 15,000 people registered with the Manpower department versus, say, around 7-8,000 just a couple of years ago. So, these are relatively high numbers So, from this trend, it does look like the job market situation is improving, although probably not improving fast enough for quite a few people."

Prime Minister Goh has reiterated that "harmonious industrial relations remains key in helping with the adjustments". So, how can Singapore hope to achieve this amidst more cost-cutting measures by companies to see through the economic situation in Singapore?

SSW: "Well, I suppose most important thing is that the overall economic environment improves and once you start to see that, then certainly, you will have a much more larger pie for both workers and companies to share with. And we do see that happening. So, you really must take, at this point, time to grow. If we do not see that, then I think certainly, maybe from the company's point of view, another 'sledge-hammer' approach will be continued to be applied. And of course, it always, in this environment, it always tends to favour the employers rather than employees. So, it is a very delicate line to walk as far as the workers are concerned here."

How will the global economy affect the growth of the Singapore economy ?

SSW: "Well, for those FTAs and their impact on Singapore, it will probably take a while for them to filter through. We are really looking how all these combined FTAs that will likely have some impact on the service side of the Singapore economy, probably over the next, say, 5 to 10 years or so. In particular, for companies to use Singapore as the launch pads to the burgeoning economies of Southeast Asia. Nearer term, I think the potential is still very much focussed on, say, Northeast Asia or China. And with the regional economies just showing signs of recovery, we may only just see tentative signs of companies coming to Singapore to take advantage of FTAs to ride into the region here. For Singapore, there is still much to be expected from such growth drivers? It is still very much on the external factors for manufactured goods and if global demand picks up, you know? We make more stuff, we ship more stuff, get more people coming through Singapore, I think that is where the growth drivers will remain for the near term."