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.