OUTLOOK FOR 1993

The global outlook for 1993 is cautiously optimistic. Although forecasts by the OECD and IMF in the last 2 years have been scaled down repeatedly, their most recent forecasts point to better prospects in the industrial countries. The OECD and IMF expect the US economy to grow by 2.4% to 3% in 1993. This bullish assessment is supported by data showing good quarterly growth rates and stronger consumer confidence. The UK and Canada are also expected to recover from recession. However, the other two large industrial economies, Germany and Japan, are slowing down. Overall, the industrial countries are likely to grow by 1.9% in 1993, up from the 1.5% in 1992.

The growth prospects in East Asia, which accounts for one-third of our non-oil domestic exports, remain good. Taiwan, South Korea and Hong Kong expect to grow by 7%, 6% to 7% and 5% respectively. Malaysia and Thailand are expected to grow by 8% and Indonesia by 6.5%. China is likely to register double-digit growth again in 1993.

The business community expects business conditions to be stable in the first 6 months of 1993. In the latest survey of business expectations, a net balance of 9% of firms in the manufacturing sector expect business conditions in the first half of 1993 to be better than the preceding 6 months. Firms in the electronics industry are optimistic, with a net balance of 29% expecting better business. Business in the commerce sector is expected to be more moderate after the year-end high. The transport and business services sectors are optimistic about prospects. The leading indicators, which indicate economic activity about three quarters ahead, continue to show an upward trend.

Although our relative competitiveness position has declined slightly, investors are confident about Singapore's fundamentals. Investment commitments in the manufacturing sector amounted to $3.5 billion in 1992, a record high. These high-quality new projects, with projected incremental value added per worker of $240,000, or about 4 times the existing average, will boost the productivity of the manufacturing sector.

In view of the generally favourable external and domestic conditions, the Ministry of Trade and Industry's assessment is that growth in 1993 will be between 6% and 7%. The Government will therefore adjust the CPF contribution rates by another half a percentage point with effect from 1st July 1993. The employers' contribution rate will be raised by 0.5 percentage point to 18.5% while the employees' contribution rate will be reduced by 0.5 percentage point to 21.5%. If the world economic environment remains favourable in 1994 and our economy continues to grow satisfactorily, Government will further adjust the CPF contribution rates in 1994 by an additional 1.5 percentage points, bringing the contribution rates for the employer and employee to 20% each on 1st July 1994.