Singapore expects lower economic growth in 1995

Singapore expects lower economic growth in 1995

SINGAPORE (AFP): Singapore's economic growth is expected to moderate to seven-to-eight percent in 1995, lower than that projected by the government, the Monetary Authority of Singapore (MAS) said yesterday.

The forecast by the de facto central bank was about half a percentage point lower than the projection by the ministry of trade and industry, which had estimated gross domestic product growth at 7.5-to-8.5 percent.

An MAS spokesman said the authority's estimate in its latest annual report was based on economic indicators that had become available in the weeks following the ministry's projection in mid-May.

He said the MAS also took into account slower growth in both the United States and Japan.

The MAS's forecast, however, was an upward revision of its own previous estimate of six-to-seven percent growth.

The higher estimate reflected a greater intake of foreign workers by the labor-short island state following a relaxation of worker quotas in December.

A growth rate of seven-to-eight percent was sustainable over the next five years, the MAS spokesman said.

Singapore's GDP growth was estimated at 10.1 percent in 1994, above the official forecast range of six-to-eight percent at the start of the year.

The more favorable outcome reflected stronger-than-expected global electronics demand.

Economists have welcomed the slower growth this year as a dampener on prospects of overheating, saying the rapid double- digit expansion in the past two years had pushed up wage pressures, stretched production capacities and exacerbated the tightness of the labor market.

The moderation of growth this year was attributed to a dampening of US growth following the Federal Reserve's monetary tightening since early 1994 and other major markets.

Japan's recovery is likely to falter as the surge in the yen this year reduces its export growth and propels Japanese manufacturers to relocate to lower-cost locations, the MAS annual report said.

Growth in the European economies would moderate slightly, with German export competitiveness eroded somewhat by the mark's appreciation, the report said.

Despite the slowdown in Singapore's major markets, the island's economic growth will again be led by external demand, the MAS said.

"Non-oil domestic export growth should remain strong at 10-to- 15 percent in 1995, although decelerating from the 23 percent rate in 1994," it said.