S'pore economy slows and sees deficit, Goh says
S'pore economy slows and sees deficit, Goh says
SINGAPORE (Reuters): Singapore Prime Minister Goh Chok Tong
said on Saturday that second-quarter growth in Singapore had
slowed and the rest of the year would be worse.
"After a revised growth of 6.1 percent in the first quarter,
(the economy) registered only 1.6 percent in the second quarter.
It will slow further in the second half," he said in his national
day message.
Singapore celebrates its 33rd year of independence on August
9th. The Prime Minister traditionally addresses the nation on the
eve of the celebrations.
Goh said the main cause of Singapore's slow growth was the
sharp fall in external demand from its key trading partners in
Asia -- Japan, Indonesia and Malaysia.
"External demand accounts for 70 percent of total demand for
our goods and services..," Goh said. "So when our external demand
falls we are severely affected."
Goh said Singapore's competitive position had also been hurt
by the depreciation in the currencies of its neighbours as their
exports to the U.S. and Europe had become more competitive.
"The economic crisis has affected Singapore's competitive
position," Goh said.
"Our neighbours' weaker currencies have made their wages and
other costs much cheaper than ours. This has made their exports
to the U.S. and Europe more competitive."
Goh noted in his speech that South Korea, Thailand, Malaysia
and Indonesia have seen their currencies depreciate by 35 to 80
percent against the US dollar while the Singapore dollar has
depreciated by less than 20 percent.
He added that countries in the region which have built new
airports, ports and industrial estates will have surplus capacity
and will lower prices to stay competitive or "may even resort to
administrative measures or legislation."
Goh said the Asain slowdown presented Singapore with its "most
formidable" challenge since independence.
He said Singapore is likely to see its second budget deficit
next year as government revenues fall while it continues to spend
on infrastructure.
Goh cautioned, however, on Singapore dipping too much into its
reserves to kick start the flagging economy.
"As your trustee responsible for these reserves, I am honour-
bound to protect them. We must not fritter them away, whatever
the pressures we face," he added.
Singapore announced the S$2 billion (US$1.15 billion) stimulus
package in June, a move Finance Minister Richard Hu said would
result in a budget deficit of about S$800 million.
It was the first time the wealthy city state had a budget
deficit since it faced a recession in the mid-1980s.