ECONOMIC PERFORMANCE (Appraisal)

Mr S. Vasoo asked the Acting Minister for Trade and Industry if he will give a brief appraisal of the economic performance so far and the likely challenges Singapore will face in the light of the economic slow-down in the Asean region.

The Acting Minister for Trade and Industry (BG Lee Hsien Loong): Mr Speaker, Sir, the economy is gradually recovering from the recession of 1985. After declining by 3.4% in the first quarter of 1986, the GDP grew by 0.8% in the second quarter. Preliminary data for the third quarter show that growth will again be positive. For the whole of 1986, the economy is expected to grow by 1% or 2%.

Two sectors, Manufacturing and Transport and Communications, have led the economic recovery. Manufacturing has benefitted from a sharp pick-up this year in overseas orders, particularly for electronic goods, and also from a greater competitiveness they now have as a result of our new cost-cutting measures.

Transport and Communications have also expanded rapidly, as international shipping companies have taken advantage of Singapore's lower port charges for transhipment of cargo.

The rest of the economy is doing less well. Construction activity continues to shrink, as many projects in the private sector near completion, whilst few new ones are being started.

The commerce and financial and business services sectors remain weak, due to continuing economic difficulties in our neighbouring countries.

Singapore is closely linked to the economies of Indonesia and Malaysia. Both these countries have been severely affected by low commodity prices. Malaysia has implemented austerity measures to cut the public sector deficit, lower spending on imports, and improve its balance of payments. Indonesia's recent move to devalue the rupiah will cost Singapore traders some re-export business. The increase in exit taxes in Indonesia will further reduce the number of Indonesian tourists coming to Singapore, and that will affect our hotel and retail trades.

The regional economic outlook is a major reason for being cautious about our growth prospects. We will have to make up for this by becoming more competitive, by exporting more to OECD countries, and by developing new markets beyond our immediate region.