PROJECTED CPI AND GROWTH RATE FOR 2008

PROJECTED CPI AND GROWTH RATE FOR 2008: 1.

Mr Seah Kian Peng asked the Minister for Trade and Industry (a) given that the CPI for 2007 was 2.1%, but showing significant increases in the last few months, what is the projected CPI for 2008; and (b) in light of the recent turmoil in the equity markets and the possible recession in the USA, what is the latest projected growth rate for Singapore for 2008.

The Minister for Trade and Industry (Mr Lim Hng Kiang): Mr Speaker, Sir, the revised CPI and GDP forecasts for 2008 were released by my Ministry yesterday. The Minister for Finance will also cover these two issues in his Budget speech later.

Based on MAS’ latest projection, the revised CPI forecast range for 2008 is 4.5%-5.5%. This latest forecast takes into account the sustained increases in global energy and food prices in recent months, and the stronger pass-through of higher global energy and food prices to domestic retail prices.

The current GDP forecast range for 2008 is 4.0%-6.0%. The lower growth forecast reflects the higher downside risks stemming from a US economic downturn. Compared to three months ago, there is broad consensus now that the US economy is entering a slowdown. The key uncertainty is over the length and severity of this slowdown. This will influence how the rest of the world, including Singapore, will be affected.

We will continue to monitor the situation closely and update the growth forecast where necessary.

Mr Seah Kian Peng (Marine Parade): Mr Speaker, Sir, given that the prospect of a US recession is quite high, can I assume that, based on that projection, the worst case scenario is for us to grow by 4% this year?

Mr Lim Hng Kiang: Mr Speaker, Sir, as we explained at the press conference yesterday, the baseline forecast assumes the US economy entering a recession in the early part of this year and recovering because of the actions done by the Federal Reserves and the fiscal stimulus that the US government has introduced. That is the baseline forecast. If the US economy slows down further and the recession is deeper and longer, then, of course, we will go to the lower end of our forecast range.