ECONOMIC OUTLOOK FOR 1995

The external environment remains favourable, though some caution is called for. World capital markets have recently been volatile, due to concerns over US interest rates, the devaluation of the Mexican peso and the earthquake in Kobe.

The industrialised countries as a group are likely to see stronger growth but lower inflation. The Asian economies are expected to continue to enjoy robust growth. The generally favourable external environment means continued strong demand for Singapore products and services. The latest survey of business expectations show that industrialists and businessmen in the services sector are optimistic about prospects up to June 1995.

However, following two years of strong growth, domestic costs are likely to rise. Increased cost pressures would have some negative impact on our growth prospects in 1995. In addition, the dominant electronics industry is highly volatile and growth could slow down significantly at short notice. Recent events in the international scene have also had some dampening effect on stockmarkets world-wide.

After taking into account these factors, the Ministry of Trade and Industry has revised its forecast for 1995 slightly downwards, from 8-9% to 7.5-8.5%.