8% growth possible next year, bullish economist says

Citi's Chua upbeat, but others remain more cautious

(SINGAPORE) So much for cautious optimism. One of the more bullish forecasters in town now says that GDP growth of more than 8 per cent is 'achievable' for Singapore in 2010, even if exports expand only modestly.

Officially, Citigroup is looking at a 2.7 per cent GDP contraction here in 2009, and a 6.2 per cent growth rebound next year - already at the high end of market forecasts.

But at a CEO luncheon yesterday, Chua Hak Bin, head of Singapore research at Citi, painted a bullish all-stars-aligned scenario that could have GDP growth back up to erstwhile robust levels, just a year after recession.

'This recovery looks more like a normal V than U or L,' he said.

One of three panellists at a discussion on 'The Recovery: Is it for Real?' at the luncheon, Dr Chua said a synchronised global recovery, aggressive fiscal and monetary policies globally and in Singapore, as well as conducive local factors, make for a virtuous confluence that could spell a strong rebound here next year.

While the job market remains the wild card, a liberal pro-immigration policy and the timely opening of the two integrated resorts in the first quarter of 2010 suggests that employment could well grow by more than 100,000 jobs next year, he said.

Citi's forecasts expect jobs growth from the second half of 2009 through 2010, and GDP gains of near-10 per cent by the first quarter of 2010. Indeed, there's a good chance that current Q3 growth - which Citi has estimated at negative 1.9 per cent - may turn positive, given strong July manufacturing figures, its analysts say.

Overall, a post-crisis approach of low income tax, fiscal flexibility and pro-immigration bodes well for Singapore, Dr Chua said. And 'so long as exports are not contracting', GDP growth of more than 8 per cent next year is possible, he added.

The Ministry of Trade and Industry's forecast sees the Singapore economy contracting by between 4 and 6 per cent in 2009. Private sector economists - confidence boosted by Q2's spectacular rebound - have recently raised their forecasts of 2010 growth to a median 4.5 per cent. Citi's 'more than 8 per cent' projection would now top the league.

But not everyone at the luncheon - jointly organised by NUS Business School and BT - shared Dr Chua's strong optimism.

Fellow panellist Chang Tou Chen, head of advisory and deputy head of coverage, Asia-Pacific, at HSBC, was also unabashedly bullish - particularly on Asia. But Bernard Yeung, dean of NUS Business School and the third member of the panel, tempered the euphoric optimism on the panel with his warnings about structural and fundamental problems still at hand.

While market conditions have certainly improved from rock bottom about half a year ago, the global economy remains far from healthy. 'Not all signs are positive,' Prof Yeung said.

US businesses are still only just replenishing depreciation, not quite investing, and there's still lots of deleveraging to go across the economy.

Asia is also beset with long-term structural problems: ageing populations, environmental stress, growing income disparities and consequent social unrest.

CEOs in the audience also questioned Dr Chua's bald optimism on Singapore, pointing to the lack of US demand. No amount of Chinese consumer spending can make up for weak, lacklustre demand from Americans, said one member of the audience.

Source: Business Times, 4 Sep 2009