Singapore's most severe slump? Doesn't feel like it

[mr funny]

http://www.straitstimes.com/Prime%2B...ry_376870.html

May 15, 2009 Friday

Singapore's most severe slump? Doesn't feel like it

Govt actions, previous growth keep recession effects at bay - for now

By Fiona Chan


GOING by the numbers alone, there is no denying that Singapore is in the midst of what is by far the most severe recession in its history.

Exports collapsed in the first three months of the year by almost 30 per cent, dragging down first-quarter growth by a record -20 per cent over the previous quarter. The Government has been forced to downgrade its full-year growth forecast to -6 per cent to -9 per cent, while the International Monetary Fund (IMF) has forecast -10 per cent, making Singapore the worst performing country in Asia this year.

But there is another set of facts that presents quite a different picture. These facts may be less scientific, but they are nevertheless real.

Sales of new private homes in Singapore have jumped back to near pre-crisis levels, and there is evidence that property prices are stabilising and even inching up. Car sales dipped for a while, but then found a firmer footing. Crowds have been turning up in record numbers at travel and computer fairs.

Retail sales did drop by 15 per cent in January, but this was still better than the 20 per cent plunge during the 1997-1998 Asian financial crisis. Most restaurants in town remain packed at weekends, while the lines at nightclubs such as Butter Factory and Zouk still stretch round the block.

This disconnect - between what the statistics indicate is a gut-wrenching recession and the actual less-than-disastrous state of the real economy - has got economists debating the true impact of this 'worst-ever' recession.

Yes, some businesses have been driven to closure, thousands of people have lost their jobs and almost everyone is feeling some pain. But there is a clear 'disjuncture' between 'what are truly horrible numbers' for economic growth, exports and industrial production, and the impact this is having on 'ordinary folk as they go about their ordinary lives', Mr Manu Bhaskaran of the Centennial Group observed at an IMF event last week.

So why is the picture on the ground so different from that painted by the statistics? Economists have proffered a number of reasons.

One is that Singapore is entering this unprecedented recession from an equally unprecedented position of strength. 'A lot of Singapore's resilience is due to the seven 'fat' years we had from 2001 to 2007, where economic growth averaged 5.5 per cent a year, even with the Sars period in 2003,' said OCBC economist Selena Ling.

In particular, the past two years saw supercharged growth, boosting Singapore workers' average monthly earnings by 5.8 per cent a year. This explains why 'apart from the relatively small proportion of unemployed, the rest of the Singapore population is still in a position to shop, dine out and bargain hunt for assets'.

During the 1997-1998 crisis, the GDP per capita was $35,115. By last year, it had jumped to $53,192. In 2006 and 2007, Singapore was among the countries with the fastest growing number of millionaires.

Companies also raked in record takings, building a large buffer of savings that muted the blows of the financial crisis, said Citi economist Kit Wei Zheng.

All this means fewer than expected people and firms are going broke. Bankruptcy levels last year were half those in 2003 and 2004, while the number of companies liquidated last year was a third of that in 1999, according to Ms Ling.

Then there is the buffer that foreign workers and expatriates provide. Their number, by some estimates, has risen by 70 per cent since 2000. Jobs held by foreigners have been cut first in this recession in favour of saving Singaporean ones, especially because programmes such as the Jobs Credit Scheme protect only local workers

Time magazine, which featured Singapore's surprising resilience in an article on April 28, also gave credit to the Government's social safety net.

Part of the answer also lies in the 'dualist' nature of Singapore's economy, said Mr Bhaskaran. He estimates that half the economy is foreign in terms of ownership and employment, including manufacturing and finance - the hardest-hit sectors in this recession.

Foreign companies have suffered losses. But while there has been some spillover to local industries, this has been more contained, Mr Bhaskaran said.

Economic resilience aside, the dismal statistics themselves could have been exaggerated. Companies pre-emptively slashed production to preserve their balance sheets and conserve cash. This implied a vanishing of demand that did not quite materialise.

In all, there are 'certainly more shock absorbers' now compared with the 'shock amplifiers' in the last recession, when companies' balance sheets were weaker and policy regimes were more 'inflexible', Mr Bhaskaran said.

Whatever is the explanation, markets might do well not to overreact to the apparent contradiction between statistics and experience. Already, talk of 'green shoots' has boosted sentiment so much that Citi's Mr Kit upgraded his growth forecast for Singapore this week. If it is true that the recovery is on the way, Singapore's worst-ever recession could turn out to be among its most painless.

But there is another, more worrying possibility: That the real economy could be just lagging behind the numbers, said CIMB-GK's Song Seng Wun.

'Green shoots' may be emerging statistically, but the pain implied by the earlier figures may not have fully hit yet, thanks in part to the Government's cushions. If external demand fails to pick up, for instance, further agony could be around the corner as the job market traditionally lags the economic numbers by a few quarters.

In other words, it may not feel like -10 per cent now, but it will soon.

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[mr funny]

http://www.straitstimes.com/Invest/S...ry_377833.html

May 17, 2009

small change

Crisis will soon be just a memory

From a packed musical to long queues at diners, the signs are pointing to better days ahead

By Goh Eng Yeow, Senior Correspondent


The clouds of gloom have parted and a ray of hope now shines on investors, as global stock markets stage a two-month rally.

Even the spectre of a global pandemic cast by the Influenza A (H1N1) virus has failed to dampen the exuberance in the air.

Cats, the well-known London musical, played to capacity audiences at the Esplanade for four weeks before ending its run on May 3.

I was among those who caught its performance, relishing it as much as the first time I watched it in London many years ago.

What must have been surprising was its success, considering that Singapore is undergoing its most serious economic slowdown since independence in 1965.

There was a palpable mood of cheer that night last month when I caught the show, as the well-dressed audience took their seats.

Across the road at Marina Square where I grabbed a quick dinner before the show, there were long queues of hungry diners waiting to get into popular restaurants - not a scene a person would associate with a contracting economy.

The ubiquitous queue reminiscent of the boom time in 2007 was back. Last month, people lined up overnight to buy units in Parc Lumiere, a housing project in Simei to be built by a private developer under the HDB Design, Build and Sell Scheme.

It was a stark contrast from February, when the gloom was so prevalent that retailers complained of a sharp drop in sales. Even the usually busy restaurant at my club showed a visible drop in the number of customers.

The difficult economic times touched even global pop stars like Rod Stewart, who told his audience when he performed in Singapore in February that he had just sold his Ferrari.

True, bread-and-butter issues still rule the roost, jobs are still being lost, and companies struggle to keep their businesses running. Business, however, has not fallen off the cliff.

And the sense of panic, which gripped Singaporeans last December, has subsided.

The $20.5 billion Budget, unveiled in January, has succeeded in cushioning part of the blow from the fallout of the global economic crisis.

A similar miracle is occurring across Asia, where governments are pumping in huge sums of money to keep their respective economies afloat.

Even the darkest prophets of doom will concede that Asian economies are nowhere in the dire straits predicted by them when they made their gloomy assessments last December.

Asian economies are slowing down all right, but they are not crashing at the near double-digit rates some economists were predicting at the start of the year.

Last month, when I was in South Korea for a short holiday, I was surprised that there were few signs of financial distress among South Koreans as well.

This was despite the constant stream of grim financial news reports about the South Korean economy, reminding readers of the 30 per cent collapse in the Korean won since last year and the spectacular slump in the country's exports as demand in key markets such as the United States sagged.

Signs of an economy in rude health were everywhere. Traffic in Seoul snarled to a crawl during rush hour, while the Myeongdong shopping district in the heart of the city was crammed with shoppers, with hardly a shuttered outlet in sight to suggest that there was a business slowdown.

It was a big contrast from 10 years ago during the Asian financial crisis when once-proud South Korean bosses were reduced to waiting at dinner tables after their companies went belly up.

Mr Manu Bhaskaran, an economist with consultancy group Centennial, says there is a plausible explanation for the disconnect between the grim economic data and the largely normal everyday life in Singapore.

'We have one part of the economy that is largely foreign and another part that is largely Singaporean,' he explains.

The components of the economy currently in free fall - manufacturing and parts of finance - are largely foreign. They involve multinational firms that employ large numbers of foreign workers and global investment banks, with highly paid staff redeployed from New York and London.

'In the boom, they did not seem to boost the welfare of ordinary Singaporeans as much as the gross domestic product growth numbers implied, and they are not hurting Singaporeans very much on the way down either,' MrBhaskaran says.

During the current slowdown, many companies have chosen to cut the pay of Singaporean workers.

'Pay cuts of around 10 per cent to 15 per cent are not nice, but neither are they painful enough to force an abrupt cut in spending,' he notes.

He warns, though, that unless the global economy picks up soon, companies may have to undertake more painful restructuring, like cutting jobs, which has so far been largely avoided.

And that will unleash a fallout - falling consumer prices, rising loan defaults and plummeting real estate values - which will make Singaporeans feel poorer.

This is not a nice thought to entertain on a Sunday, but I am optimistic that most of us will muddle our way through this economic crisis just fine.

To paraphrase the lyrics from Memory, the theme song for Cats, dawn will come, the current economic gloom will become a memory and a new era will have begun.

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