SINGAPORE'S ECONOMIC AND EMPLOYMENT OUTLOOK

SINGAPORE'S ECONOMIC AND EMPLOYMENT OUTLOOK:

(Update):

1.:

Mdm Halimah Yacob asked the Minister for Trade and Industry (a) whether he will provide an update on

Column: 1832

Singapore’s economic and employment outlook; (b) what are the factors that can derail growth in 2010, particularly with increasing protectionism in the aftermath of the global economic and financial meltdown; and (c) in what ways APEC can energise growth and development in the region.

The Minister for Trade and Industry (Mr Lim Hng Kiang): Mr Speaker, Sir, my Ministry released the 2010 economic growth forecasts on 19 November 2009. We also released the advance GDP estimates for the fourth quarter of 2009 last week (4th January 2010). Based on the advance estimates, the Singapore economy contracted by 2.1% in 2009. This is in line with MTI’s forecast of a contraction of 2% to 2.5% for the year.

The global economy is turning around. This has contributed to the upturn in our economy in the second and third quarters of 2009. In the fourth quarter, our economy saw a moderate dip as compared to the preceding quarter, due to a pull-back in the manufacturing sector. This, however, does not imply a return to recessionary conditions. Instead, it largely reflects a moderation in the pace of recovery after the exceptionally strong expansion in the previous two quarters. Compared to the fourth quarter of 2008, the economy registered positive growth, at 3.5%, in the last quarter of 2009.

For 2010, my Ministry expects that the economy will grow by 3% to 5%. External demand will continue to grow, but at a sluggish pace. There will be some support from continued inventory restocking and a resumption in global trade. Domestically, the opening of new facilities for the chemicals and biomedical manufacturing clusters as well as the opening of the Integrated Resorts (IRs) will also provide a boost in 2010.

The recovery in 2010 is expected to be uneven. The risk of a return to

Column: 1833

recession is low in the absence of further financial shocks. But growth momentum in the second half of 2010 may slow down as the effects of global fiscal stimulus measures and inventory restocking wane. In addition, weak household balance sheets and persistently high unemployment, especially in the US, will weigh down on consumer demand in our key export markets. Growth in 2010 may also be derailed if "creeping" trade protectionism becomes more prevalent and causes global trade flows to contract again. But the likelihood of this scenario is low. Thanks to the public commitments and exhortations by forums such as the G20 and APEC, protectionism has been largely kept in check. The threat today is lower than it was at the start of last year. At the recently concluded APEC Summit, economies around the table reaffirmed their commitment to keep markets open and refrain from raising new barriers to investment or to trade in goods and services. Everyone understands the dangers of protectionism at a time like this. Peer pressure through APEC and other forums should help to keep under control domestic pressures for protectionism.

Let me now turn to the outlook for the labour market. As we emerge from the recession, our labour market has stabilised. Overall employment expanded in the third quarter of 2009, a reversal from the preceding two quarters. Business and hiring sentiments have picked up in recent months with a greater proportion of companies expecting to increase their headcounts in the last quarter of 2009, compared to the earlier quarters.

The number of redundancies has also dropped significantly in the third quarter compared to the first two quarters of 2009. The unemployment rate however is likely to stay up for some time, as it typically lags economic recovery. More updated information will be available

Column: 1834

when the Ministry of Manpower releases preliminary labour market statistics for the fourth quarter of 2009 at the end of this month. There are many jobs available for Singaporeans, at the rank-and-file and PMET (Professional, Managerial, Executive and Technician) level. These jobs can be found across a diverse span of industries such as pharmaceuticals, clean energy, retail, food and beverage, hospitality, healthcare, aerospace, IT and finance. The Integrated Resorts coming up this year will also be recruiting.

Let me now address the question of how APEC can help to spur growth and development in the region. As Chair of APEC last year, Singapore played a key role in practical initiatives to promote growth, boost trade, and reduce business costs. To improve the business environment in the Asia-Pacific, APEC economies agreed to make it 25% cheaper, faster, and easier to do business in the region by 2015, with an interim target of 5% improvement by 2011. APEC will focus their efforts on five priority areas identified by the business community, namely, Starting a Business, Getting Credit, Enforcing Contracts, Trading Across Borders and Dealing with Permits. The announced targets will translate into concrete gains for businesses. For example, it could cost on average up to US$450 less to import and export a container of goods in and out of APEC economies. The time taken to start a business within APEC economies could be reduced by one week on average. The Asia-Pacific is already one of the most economically open regions in the world. Gains will come not just from being more open, but being more connected. Hence the focus on improving supply chain connectivity. We started by identifying eight critical chokepoints impeding the smooth flow of goods, services and business travellers in the Asia-Pacific. We are now in the process of developing measures to address these chokepoints. These include enhancing customs clear

Column: 1835

ance efficiency, improving coordination among border agencies, forging greater multi-modal transport linkages and developing common technical standards such as in logistics safety. These practical measures will help businesses in a tangible way, and thereby boost growth and development in the region over the medium term.

Mdm Halimah Yacob (Jurong): Mr Speaker, Sir, two follow up questions. I would like to ask the Minister what is the Ministry's assessment of the inflation rate for this year, bearing in mind there are concerns over the continued high prices of food stuffs and other essentials. And whether the Ministry's earlier assessment of the inflation rate still remains or will inflation be higher than that? The second question I would like to ask is what is the Ministry's assessment of the contribution to our GDP of the two Integrated Resorts?

Mr Lim Hng Kiang: Mr Speaker, Sir, our previous forecast that inflation will come in at between 2.5% and 3.5% this year, remains the same. On the contribution of the two IRs, they are only beginning their operations. We have to watch it carefully. When they submitted their proposals earlier, the estimate was that they would contribute between 0.5% and 1% of the GDP but this contribution would come about only when the two IRs are fully operational. So for this year, when they are only beginning operations, we can see that the contribution will be slower at the beginning.

Mdm Ho Geok Choo (West Coast): The issue on everyone's mind is whether the recovery of the economy will be "W"-shaped or otherwise. I wonder if the Minister could provide some insight on this. Second question is, what is the Ministry's stand with regard to our own industries and their capability and capacity to withstand an increasingly global protectionistic environment?

Column: 1836

Mr Lim Hng Kiang: I believe I mentioned in my speech at least on three occasions that a "W"-shaped or a double-dip recession is not likely. That is our assessment at this moment. Of course, if you followed the literature and analyses, there are some people out there who give higher probability to a double-dip recession, some giving as high as 30% or 40% probability. Our assessment is that it will not happen for us but we must expect a slower growth in the second half compared to the first half. On the performance of our industries – first of all, fortunately, the protectionist tendencies as mentioned, are lower today than at the depth of the recession in early 2009. So for that, we should be grateful. Secondly, many countries, together with the World Trade Organization (WTO) in Geneva have put a spotlight on this and are tracking this very, very stringently. Every trade measure that countries put up, WTO tracks this and broadcasts it so that everybody knows which countries are putting up additional barriers and which countries are opening up. There is a lot of peer pressure at the WTO and the APEC levels, and within the regional groupings. So I think the risk of very high levels of protectionism has receded more so now than in 2009.