S'pore less vulnerable to regional shocks<\/p>\n
SINGAPORE (Dow Jones): Although Singapore can't completely
\nisolate itself from the travails of its neighbors, it is less
\nvulnerable to regional shocks than two years ago, particularly to
\nrenewed turbulence in Indonesia, Finance Minister Richard Hu said
\nTuesday.<\/p>\n
\"Our exposure is much less now. If there should be an outbreak
\nof violence in Aceh, it will affect the investment climate of the
\nregion as a whole, which of course reflects on us,\" Hu said in an
\ninterview with Dow Jones Newswires.<\/p>\n
But because of the measures Singapore has taken, \"the impact
\nwill be medium-term, affecting the investment climate rather than
\nour own immediate prospects of economic growth,\" he said.<\/p>\n
Hu said Singapore banks have protected themselves from the
\nkind of fallout seen from Indonesia's turmoil two years ago by
\nwriting off most of their bad debt in the country.<\/p>\n
The rest of Singapore's corporate sector has also undergone
\nmassive restructuring and consolidation, improving transparency
\nand governance, in an attempt to buffer itself from another
\ncrisis, he said.<\/p>\n
Singapore has staged one of Asia's most dramatic recoveries,
\nwith the economy expected to grow by 5 percent this year and
\nnext, according to official estimates. The manufacturing sector
\nexpanded by 17 percent in the third quarter, while non-oil
\ndomestic exports surged 9 percent in the same period.<\/p>\n
Despite the dynamic growth, Hu said he isn't concerned about
\nrising inflation, which he expects to remain tame next year at
\nbetween 1 and 1.5 percent.<\/p>\n
\"External inflation worldwide is fairly benign,\" he said.
\n\"Except for an uptick in oil prices, most commodities have not
\nreally rebounded severely.\"<\/p>\n
Hu said given the mild inflation outlook, the Singapore dollar
\nis expected to remain \"fairly stable,\" but if inflation exceeds
\nSingapore's historic range of 2-3 percent, the Singapore dollar
\nwould strengthen.<\/p>\n
The Singapore authorities have traditionally depended on a
\nstrong local dollar to keep imported inflation down.<\/p>\n
The finance minister said the budget deficit for this year
\nwill be smaller than the expected 3.5 percent of gross domestic
\nproduct because of the surprisingly strong economic rebound.<\/p>\n
Moreover, Hu said the budget will return to surplus next year
\nafter two years of deficit spending if the economy meets the
\ngovernment's growth target.<\/p>\n
\"If that materializes, I think it's unlikely we'll see another
\ndeficit,\" he said.<\/p>\n
While acknowledging the healthy rebound in the global
\nelectronics industry and the continued strength of the U.S.
\neconomy, Hu assigned the lion's share of credit for Singapore's
\ndynamic growth to the government's corporate cost-cutting
\nmeasures adopted during the downturn.<\/p>\n
At the height of the crisis, the government unveiled a host of
\nmeasures worth more than S$10 billion designed to mitigate the
\nburden of the crisis on the corporate sector, including pension
\ncuts, tax breaks and the removal of levies.<\/p>\n
Although announced in 1998, most of the measures took effect
\nJan. 1, 1999.<\/p>\n
\"The importance of these was largely to insure our exporters'
\ncosts were competitive to preserve jobs,\" Hu said. \"We must
\ninsure our prices our competitive.\"<\/p>\n
He said the regional turmoil imposed much-needed restructuring
\nof Singapore's private sector, as well as hastened their push to
\nbecome regional players.<\/p>\n
\"Banks have particularly taken the opportunity to acquire
\nassets in neighboring countries,\" the finance minister said. \"The
\ndifficulty has always been in identifying suitable prospects.
\nAlthough our neighbors have suffered severe contractions, there
\nhas been generally a reluctance to sell assets.\"<\/p>",
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