PART I - REVIEW OF THE ECONOMY ECONOMIC PERFORMANCE IN 1989

In last year's Budget speech, I announced that 1988 had turned in the best economic performance in 15 years, with all major sectors, except construction, performing better or equally well as compared with 1987.

Today, I am pleased to report that the strong growth had continued into 1989. Overall, the economy expanded by 9.2%. This is higher than the projected growth rates for Hong Kong (3%), Taiwan (7.2%) and South Korea (6.6%). The expansion was broad based, and even the construction sector had turned around, registering positive growth of 1.3% for the first time since 1984. We have firmly left the shadows of the 1985 recession behind us.

Our traditional engine of growth, the manufacturing sector, has been overtaken by the financial and business services sector as the leading growth sector. The financial and business services sector grew by a sparkling 15% while the manufacturing sector grew by a creditable 9.9%.

The other sectors also expanded but more moderately than in 1988. The commerce sector grew by 8.3% while the transport and communications sector expanded by 9.4%. The performance of these two sectors was affected by the slower growth of trade in 1989. The volume of total trade grew by 8% in 1989 compared to the 30% registered in 1988. Prospects in the construction sector are promising. Its turnaround in 1989 after more than 4 years of decline will probably continue.

The broad-based growth has benefited our workers. According to CPF data, our nominal wages have risen by 12.5%. With inflation at 2.4%, this means a real wage increase of 10.1%. The increased purchasing power has been translated into buoyant private consumption expenditure which grew by 7.9%.

Strong overseas and domestic investment commitments over the last few years have resulted in capital spending rising by 18% in 1989, double the rate in 1988. The investment commitments of very nearly $2 billion in 1989 lay the foundation for further growth in the future. These commitments are indicative of our continued competitiveness and the confidence of investors in Singapore as a business location.