S'poreans brace for tough year amid regional crisis
S'poreans brace for tough year amid regional crisis
SINGAPORE (AFP): Singaporeans are bracing for tough times in 1998 as the financial turmoil that has wrought havoc and misery in much of Southeast Asia weighs on the city state's prosperous economy.
Economic growth forecast for trade-driven Singapore next year has dived to as low as 1.8 percent from around seven percent expected in 1997 while corporate earnings are projected to shrink to single-digit growth.
"It's quite certainly much tougher times than Singaporeans had experienced in the past. What we are witnessing is essentially a situation where growth is going to slow across all sectors of the economy," said Eddie Lee, economist with investment house Vickers Ballas.
Vickers Ballas has forecast Singapore's economic growth to fall to 1.8 percent in 1998 largely due to excess capacity and weakening demand stemming from regional turmoil, Lee said.
A recent poll of 17 economists conducted by the local Straits Times daily showed an average growth forecast of 4.4 percent -- below the official five to seven percent range.
Analysts said the economic slowdown should be underpinned by a decline in regional trade, the slump in the property, financial and construction sectors and the uncertain outlook for the key electronics sector.
Profits of Singapore's cash-rich banks would also be hit by a decline in loans to an oversupplied property market as well as possible loan defaults at home and in the region.
"As the situation is still fluid, we don't have a clear idea on how much profits will be hit but going by the last recession in the mid-80's, banks' profits in Singapore had plunged," said Lai Yeu Huan, banking analyst with J. M. Sassoon here.
Singapore banks are also under pressure to raise interest rates amid fears that funds are gradually moving away from the safe-haven local dollar which in the middle of December crashed to levels last seen six years ago.
Although the U.S. dollar has risen by 17 percent against the Singapore dollar since July when Thailand floated its ailing currency and triggered off regional foreign exchange turmoil, the Singapore unit had strengthened against most of its regional trade partners.
But hospitals in Singapore, regarded as a key Asian health hub, are beginning to feel the pinch of a stronger Singapore dollar against most other regional currencies.