- POSTED: 31 Dec 2013 19:27
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Economists believe the Singapore economy did well in 2013, growing by 3.7 per cent amid economic restructuring efforts and labour constraints. But some feel the growth is slightly below expectations. Many economists had expected Singapore's GDP to grow by 3.8 per cent in 2013.
SINGAPORE: Economists believe the Singapore economy did well in 2013, growing by 3.7 per cent amid economic restructuring efforts and labour constraints.
But some feel the growth is slightly below expectations. Many economists had expected Singapore's GDP to grow by 3.8 per cent in 2013.
Observers said 2013 started on a cautious note for Singapore, after the economy posted a trim 1.3 per cent growth the previous year.
But a stronger performance in the services industries and a recovery in the manufacturing sector in the second and third quarters boosted growth.
Economists expect the growth momentum in the services and trade-related sectors to continue in 2014.
The manufacturing sector is also expected to benefit from improvements in the economies of the US, European Union and Japan.
To that end, some economists are projecting growth of between 3 and slightly above 4 per cent for the Singapore economy next year.
But there are potential challenges too, including rising costs, a tight labour market, and external risks related to the tapering of stimulus measures in the US.
Francis Tan, economist at United Overseas Bank, said: "We know that the US will be going ahead to taper the rate of quantitative easing in January of 2014. What that means is that we are thinking that the US dollar against the Sing dollar will be going on a positive trajectory.
“We are thinking by the end of 2014, the US dollar to Sing dollar may reach S$1.33, higher than what we've seen today, which is S$1.26 to S$1.27. That would be a risk for importers in Singapore -- that will mean the cost of goods may be more expensive, and that may compress your margins quite a bit, unless you are able to pass on these costs to your end-consumer. If you are able to pass on the cost to consumers, it would mean more inflationary pressures for Singaporeans in terms of importer inflation in the daily items.”
Mr Tan added rising wage cost and industrial rentals will also be among the key challenges for businesses in 2014.
He said wage growth could come in at 5 to 6 per cent in 2014, higher than the 3.9 per cent this year due to the tight labour market situation.