Singapore still optimistic as growth prospects downgraded<\/p>\n
SINGAPORE (AFP): The Singapore government yesterday expressed
\nconfidence in the island's long-term economic prospects as
\ninvestment houses sharply downgraded 1998 growth forecasts
\nbecause of the regional financial crisis.<\/p>\n
\"Despite the current economic uncertainties in the region, the
\nlonger-term prospects are positive,\" Deputy Premier Lee Hsien
\nLoong said at the opening of a petrochemical plant costing S$3.4
\nbillion (US$2.1 billion).<\/p>\n
He said Southeast Asia represented a potential market of 500
\nmillion people and a combined gross domestic product of US$600
\nbillion.<\/p>\n
\"Forward-looking companies will continue to invest in
\nSoutheast Asia. Singapore hopes to attract its share of these
\ninvestments, particularly in petrochemicals,\" said Lee, a key
\neconomic policymaker.<\/p>\n
\"Petrochemical projects are highly capital-intensive, and have
\nlong pay back periods. Our stable political and economic
\nstructure will be important advantages,\" he added.<\/p>\n
Lee declined comment when asked later by reporters whether the
\ngovernment was revising its 1998 economic growth forecasts.<\/p>\n
The government has forecast 5.0 to 7.0 percent gross domestic
\nproduct (GDP) growth in 1998, but Trade and Industry Minister Lee
\nYock Suan has said this is under review after the crash of South
\nKorea, a major Singapore trade partner.<\/p>\n
Growth this year is estimated at 7.0 percent, one of the
\nhighest in Asia, after Singapore's stable policies and safe-haven
\nstatus eased the immediate effects of the regional crisis,
\ntriggered by sharp currency falls since July.<\/p>\n
Investment houses have already started slashing Singapore's
\n1998 GDP growth prospects, with local brokers Vickers Ballas
\npredicting only 1.8 percent expansion because of fears over the
\nelectronics sector, earlier thought to have rebounded from last
\nyear's slump.<\/p>\n
\"We have gotten more pessimistic about the electronics
\nindustry. There is a lot of excess capacity. Our earlier number
\nunderestimated this consolidation,\" Vickers Ballas regional
\neconomist Eddie Lee told the Business Times.<\/p>\n
Another brokerage, JM Sassoon and Co., predicted 2.5 percent
\nGDP growth for Singapore in 1998.<\/p>\n
Its chief economist, Liew Yin Sze, said the previous consensus
\nfigure of 5. 0 to 6.0 percent growth for 1998 \"cannot stand\"
\nbecause of signs of slowing consumer demand, on top of concern
\nover exports next year.<\/p>\n
This week's poor takeup of the highly coveted certificates of
\nentitlement (COEs) -- costly permits to purchase cars -- has
\ncaused concern in Singapore over slumping consumer demand and
\ntriggered price slashing by dealers.<\/p>\n
Liew told AFX-Asia, an AFP affiliate, that consumption
\nspending accounted for almost half of economic output in the
\nthird quarter.<\/p>\n
The likelihood now is that in a harsher economic climate there
\ncould be a higher rate of car loan defaults and fire sales of
\nproperties, Liew said.<\/p>\n
\"These will be clear signs of a sick economy,\" Liew said.
\nAmanda Choy, economist at SocGen Crosby Securities, said
\nconsumption patterns, including individual as well as company
\nexpenditure, will be hit hard by a falloff in economic growth.<\/p>\n
\"Much of the cut in economic growth next year will come from
\nlower consumption,\" she said.<\/p>\n
Other analysts suggested that while the economy will be under
\npressure, factors such as public spending and external demand may
\noffset some of the downturn. They expect the government to pump-
\nprime the economy by keeping up its expenditure on public housing
\nand infrastructure projects.<\/p>\n
\"Government pump-priming has been on the uptrend and we think
\nthat is going to continue,\" said Ang Lay Pheng, head of research
\nat Goldman Sachs Singapore.<\/p>\n
Ang said Goldman Sachs was tipping 1998 GDP growth of around
\nfive percent.<\/p>",
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