Sep 23, 2008

Economic growth may dip below 4%

But Singapore's diversified economy will help it through, says minister

By Francis Chan

TRADE Minister Lim Hng Kiang said yesterday that economic growth may dip below 4 per cent this year, even as global financial markets try to turn the corner.

Mr Lim also addressed how the United States financial fallout has hit - and could further affect - Singapore.

'The financial difficulties in the US have led to de-leveraging and credit contractions, therefore slowing global growth,' said the minister, who was speaking to the media on the sidelines of the Latin Asia Business Forum 2008.

'That means more difficult export markets for Singapore companies and for our economy...later this year and going into next year.'

He added that he expects economic growth to be 'closer to 4 per cent, maybe even a bit below 4 per cent, depending on how the financial crisis pans out over the next few weeks and months'.

His forecast comes on the back of the Government's revision of its full-year forecast from 4 to 6 per cent previously to 4 to 5 per cent last month.

'We expect the economy to slow down - it's inevitable but we are confident...we are well-placed to ride this cycle,' said Mr Lim.

He said Singapore is 'as well-prepared for these difficulties as we can ever be' because of a well-diversified economy.

'We have our domestic economy to hold us up and we are also looking for other growth opportunities in Asia, Latin America and the Middle East.

'So we hope that with our exposures in different markets and diversification of different sectors...we will be able to ride through the difficulties.'

He also dismissed the notion that Singapore would slide into a technical recession - two consecutive quarters of negative growth. 'What is important for Singaporeans is whether we can keep the jobs going,' he said, adding that the Republic's 'very steady pipeline' of investments and different projects will keep generating jobs.

He also pointed to the possible benefits that could arise out of the ongoing financial system troubles: 'In every crisis, there will be opportunities but I wouldn't overplay the opportunities.

'Our first priority is to make sure we ride through this; that our ship is steady and that we continue to generate employment and Singaporeans are not too hard- pressed because of these difficulties.'

Mr Lim said that it was also fortunate for Singapore that China, India and the rest of South-east Asia are still 'holding up reasonably well'. 'And in Latin America, they are having fairly good growth at more than 5 per cent, so we should hitch on those opportunities there,' he added.

Working together with Singapore was one of the two key themes that dominated yesterday's main plenary discussion between government officials from Trinidad and Tobago, Peru, Brazil, Chile, Panama and Mexico. The other was the strong desire of the delegates to emulate Singapore's success as a gateway to Asia.

'We have already signed 57 free trade agreements and 97 per cent of our exports flow to those countries,' said the Chilean Vice-Minister for Finance, Ms Maria Olivia Recart Herrera. 'So like Singapore in Asia, Chile can be an open door to Latin and South America.'

Panama's Deputy Minister for Foreign Trade, Mr Severo Sousa, agreed: 'Yes, we too are often referred to as the Singapore of Latin America and that's because with our Panama Canal, we are really the gateway to the Americas.'

Peru, the latest Latin American nation to sign a free trade deal with Singapore - after Panama - cited similarities between Singapore and Peru in terms of how easy it is to run a business. 'Like Singapore, we give the same treatment to both foreign and local businessmen so as to facilitate more opportunities,' said the nation's Foreign Commerce and Tourism Minister, Ms Mercedes Araoz Fernandez.

The comments struck a chord with Mr Lim: 'That's our job in Government: To provide these opportunities to as many Singaporean companies as possible, be it in Asia, Latin America and the Middle East.'

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