S'porean PM Goh warns of harder times ahead
S'porean PM Goh warns of harder times ahead
SINGAPORE (Reuters): Singapore faces a year of lower economic growth and higher unemployment as the U.S. slowdown hits its electronics industry and the economies of its neighbors in the region, Prime Minister Goh Chok Tong said.
"We must brace ourselves for a leaner year ahead," Goh warned in his annual May Day message released on Sunday.
Goh expressed concern about possible job losses especially due to the global downturn in the electronics industry, which accounts for 55 percent of Singapore's domestic exports.
"Some workers will be retrenched, particularly those in the electronics industry. Our unemployment rate is likely to edge upwards," the Prime Minister said.
The Singapore's economy is expected to grow at a slower 3.5 to 5.5 percent rate this year from a fast 9.9 percent clip last year, according to official government forecasts.
Goh said Singapore's outlook is also being affected by the impact of the U.S. economic slowdown on its partners in the Association of Southeast Asian Nations (ASEAN), particularly Indonesia and Malaysia.
Several ASEAN countries also face domestic political problems, Goh said.
"Our neighbors difficulties affect us because we are interdependent," Goh said.
Singapore's trade with ASEAN countries accounts for 26 percent of its Gross Domestic Product, while the U.S. accounts for 16 percent, he said.
"The ASEAN economies are under severe stress. Like Singapore, they are hit by the slowdown in the U.S. economy," Goh said.
The uncertain political and economic outlook in the region would also affect investor confidence and interest, Goh said.
"Some companies invest in Singapore for the larger ASEAN market."
"Hence, while we may manage our politics and economy well, the negative assessment of the region will diminish investor interest in Singapore," said Goh.
Goh said the government was closely watching developments, and did not expect a genuine recession to occur.
"But if the slowdown becomes more severe than we expect, the government would implement measures to help companies and workers cope, as we have done before" he said.
Goh noted that companies were already facing lower orders and dwindling profits, and pushing up wages would only compound employers' problems.
He stressed that it would be prudent for Singapore to moderate wage increases as companies were cutting back production sharply and running down inventories.