Singapore still optimistic as growth prospects downgraded
Singapore still optimistic as growth prospects downgraded
SINGAPORE (AFP): The Singapore government yesterday expressed confidence in the island's long-term economic prospects as investment houses sharply downgraded 1998 growth forecasts because of the regional financial crisis.
"Despite the current economic uncertainties in the region, the longer-term prospects are positive," Deputy Premier Lee Hsien Loong said at the opening of a petrochemical plant costing S$3.4 billion (US$2.1 billion).
He said Southeast Asia represented a potential market of 500 million people and a combined gross domestic product of US$600 billion.
"Forward-looking companies will continue to invest in Southeast Asia. Singapore hopes to attract its share of these investments, particularly in petrochemicals," said Lee, a key economic policymaker.
"Petrochemical projects are highly capital-intensive, and have long pay back periods. Our stable political and economic structure will be important advantages," he added.
Lee declined comment when asked later by reporters whether the government was revising its 1998 economic growth forecasts.
The government has forecast 5.0 to 7.0 percent gross domestic product (GDP) growth in 1998, but Trade and Industry Minister Lee Yock Suan has said this is under review after the crash of South Korea, a major Singapore trade partner.
Growth this year is estimated at 7.0 percent, one of the highest in Asia, after Singapore's stable policies and safe-haven status eased the immediate effects of the regional crisis, triggered by sharp currency falls since July.
Investment houses have already started slashing Singapore's 1998 GDP growth prospects, with local brokers Vickers Ballas predicting only 1.8 percent expansion because of fears over the electronics sector, earlier thought to have rebounded from last year's slump.
"We have gotten more pessimistic about the electronics industry. There is a lot of excess capacity. Our earlier number underestimated this consolidation," Vickers Ballas regional economist Eddie Lee told the Business Times.
Another brokerage, JM Sassoon and Co., predicted 2.5 percent GDP growth for Singapore in 1998.
Its chief economist, Liew Yin Sze, said the previous consensus figure of 5. 0 to 6.0 percent growth for 1998 "cannot stand" because of signs of slowing consumer demand, on top of concern over exports next year.
This week's poor takeup of the highly coveted certificates of entitlement (COEs) -- costly permits to purchase cars -- has caused concern in Singapore over slumping consumer demand and triggered price slashing by dealers.
Liew told AFX-Asia, an AFP affiliate, that consumption spending accounted for almost half of economic output in the third quarter.
The likelihood now is that in a harsher economic climate there could be a higher rate of car loan defaults and fire sales of properties, Liew said.
"These will be clear signs of a sick economy," Liew said. Amanda Choy, economist at SocGen Crosby Securities, said consumption patterns, including individual as well as company expenditure, will be hit hard by a falloff in economic growth.
"Much of the cut in economic growth next year will come from lower consumption," she said.
Other analysts suggested that while the economy will be under pressure, factors such as public spending and external demand may offset some of the downturn. They expect the government to pump- prime the economy by keeping up its expenditure on public housing and infrastructure projects.
"Government pump-priming has been on the uptrend and we think that is going to continue," said Ang Lay Pheng, head of research at Goldman Sachs Singapore.
Ang said Goldman Sachs was tipping 1998 GDP growth of around five percent.