Economy better, but tests ahead, says PM

First-half growth at -6.5% 'less bad than feared'; full-year outlook still -4% to -6%

Singapore is now in a stronger economic position after a turbulent start to the year, thanks to a united response from Singaporeans and a slew of government measures that cushioned the impact of the downturn.

Prime Minister Lee Hsien Loong presented this reading of Singapore's situation in his National Day message televised last night.

These factors, along with a 'somewhat stabilised' global situation, helped the economy bounce back strongly in the second quarter this year.

'As a result, growth in the first half of the year was minus 6.5 per cent - a very significant contraction, but less bad than we had feared,' he said.

Maintaining the Government's growth projections for the year - revised last month by the Trade and Industry Ministry - he said the economy 'will still shrink, but only by 4 per cent to 6 per cent'.

Previous projected growth had been minus 6 per cent to 9 per cent.

National University of Singapore economics professor Shandre Thangavelu said the forecast showed the economy was gaining stability. Positive external signs included a drop in the American jobless rate.

But Mr Lee felt it was too early to celebrate. The outlook remains clouded: Advanced economies are not expected to bounce back soon and a second wave of retrenchments is still possible.

Yet Singapore can still grow: 'We can and must look for new ways to develop and prosper. Opportunities still exist, especially in Asia, but we need all our ingenuity and resourcefulness to find and exploit them.'

Striking an upbeat yet measured tone, he centred his 10-minute speech on two chief themes: Ways to beat economic challenges, and the imperative to stay united.

He first took stock of the response to the recession. A variety of measures included bringing forward the Budget to January and an unprecedented use of past reserves to fund job-saving schemes.

One result: Singapore has one of the world's lowest jobless rates - 3.3 per cent - despite being one of the worst-hit economies.

'Singaporeans too have responded resolutely and cohesively,' he noted.

The vista of Singapore's financial district was Mr Lee's backdrop as he addressed Singaporeans from a lounge of the Marina Bay floating platform, the venue for today's National Day Parade.

He said Singapore needed to find new opportunities. This was a role for the new Economic Strategies Committee, which will present its proposals next year.

Confidence was what he sought to inspire in recalling Singapore's journey since self-government in 1959.

'Each time we were challenged, we responded as one, everyone pulling together and working for the common good,' he said. Each success cemented social cohesion.

From confronting the early racial riots, to the recent H1N1 flu outbreak, he said a key factor that had pulled Singapore through was unity.

'We must work hard to strengthen it, and to bridge potential divides within our society, be it between Singaporeans and new arrivals, between rich and poor, or most fundamental of all, between the different races and religions.'

Political observer Eugene Tan said Mr Lee's message of unity aimed to bridge divides that could widen in a downturn: 'He was trying to remind Singaporeans that if you want a home, you need unity. With unity, we can overcome all kinds of challenges, like we have done in the past.'

Source: Sunday Times, 9 Aug 2009