EDB draws record S$16b in fixed asset investments in manufacturing
By Yvonne Cheong, Channel NewsAsia | Posted: 31 December 2007 2052 hrs

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SINGAPORE : The Singapore economy grew 7.5 percent for the whole year.

This was revealed by Prime Minister Lee Hsien Loong in his New Year Message on Monday.

The figure is in line with the government's forecast for a 7.5 to 8 percent expansion.

He also said that the Economic Development Board (EDB) drew a record S$16 billion in fixed asset investments (FAI) in manufacturing this year - almost double the S$8.8 billion posted in 2006.

With the full-year growth coming in at 7.5 percent, analysts say this works out to a 6 percent expansion in the fourth quarter.

This is down from the 8.9 percent pace in the previous three months - tempered by muted manufacturing figures in October and November.

Economists say it's likely services, in particular financial services, didn't hold up as well as they should have.

Vishnu Varathan, Regional Economist, Forecast, said: "The guess would be right away that services and maybe financial services didn't perform as well as would have been expected, or at least from the kind of growth rate that was seen in the third quarter."

Still they say a 7.5 percent pace for the full year is commendable for a developed economy like Singapore's.

The government is estimating growth next year to be a more moderate 4.5 to 6.5 percent, and economists are equally, if not more, upbeat.

They say structural changes in sectors such as services have been key to the robust economy.

Jimmy Koh, Head of Economics-Treasury Research, UOB, said: "To a certain extent, we have underestimated the effect of these structural changes and how investors and market respond. Partly also we're operating in a fairly moderate environment. Liquidity is still there. That's why we've seen property prices escalating in a big way, far beyond our understanding as Singaporeans. Next year wise, the situation is a lot due to external risk and I won't be surprised if we could have another outperformance."

The S$16 billion of FAI in manufacturing recorded for 2007 include the second world-scale petrochemical complex by ExxonMobil and the world's largest integrated solar plant to be built by Norwegian firm REC.

The EDB also attracted projects generating S$3 billion of total business spending in services.

Vishnu Varathan said: "I think what actually happens with all these fixed asset investments are basically two things. One is of course, increase in capacity, so we're actually increasing the capability of the economy to produce stronger numbers going forward in the longer run. The other is that we are diversifying away from our traditionally electronics base. We're (now) investing more in biomedical, we're investing more in petrochemical and we're investing more in life sciences. These are sectors that will offer some buffer against global economy or global economic slowdown."

On inflation, the Prime Minister said while prices have gone up, so have earnings.

In his New Year Message, PM Lee said his government will be tackling three significant policy decisions in the coming year - in healthcare, in land transport, in particular car ownership and road congestion and in education.

He said the Singapore economy is in a strong position and weather well even the effects of a slowdown in the US economy. - CNA/ch