With the S'pore economy on the mend, there are more pressing issues for analysts than how the final growth number will pan out
IN a year when the official growth forecast was slashed three times and then raised twice, with the market forecasts mostly in tow, all eyes were on how far the economy would sink in what looked to be its deepest recession on record.
As it has turned out, the GDP contraction in 2009 was (or is currently estimated at) 2.1 per cent, which just numerically is not as bad as 2001's 2.4 per cent shrinkage.
In fact, one of the more gung-ho private sector economists believes that when the numbers are finalised next month, the 2009 contraction could prove to be a 'mere' 1.5 per cent - a far cry from the doomsday projections of 6 to 9, even 10 to 12, per cent plunges at the height of recessionary anxieties about 10 months ago.
If so, the annual contraction in what was widely feared to be a debilitating recession would turn out to be comparable - just numerically - with the downturns in 1985 and 1998, when the economy shrank 1.4 per cent in each case.
Still, lest we forget, even if the annual contraction is not the sharpest on record, the 2009 recession did live up to its 'deepest', 'sharpest' hype - and almost 'most protracted' too.
The quarterly contractions - 9.4 per cent year on year in Q1 last year, and 16.4 per cent sequentially in Q4 2008, followed by another 11.5 per cent fall in Q1 2009 - surpassed the highs (or is it lows?) in previous recessions.
One-tenth and more of the economy was lost in one fell swoop. And the four-quarter stretch of sharp sequential declines from Q2 2008 matches, in duration, that in the 1998 downturn. The only saving grace of the latest recession is the relatively smaller number of jobs lost.
Forecast for 2010
In any case, with all the economic tumult last year, interest in the GDP growth figures was more than apparent enough, if not for first clues on when the recession would end.
Even now, with recovery on the cards, economists are, it seems, falling over themselves trying to outdo the official 3 to 5 per cent growth forecast for 2010.
Of course, whether the economy grows 3, 5 or 7 per cent this year is not at all irrelevant, not least to civil servants whose bonuses are tied to GDP expectations.
But now that the economy has, by all indications, turned the corner, the exact growth figure going forward - so long as it's solid growth of at least 3 to 5 per cent, and no further dip - is arguably not the most pressing or even piquant issue of the day.
Just as, during a recession, it's rather more important to identify the economic turnaround than to foretell with pinpoint accuracy the growth pace for the quarter or year.
What might be the more pressing issues, apart from the hope of no further economic dips and shocks? A good number of challenges at hand, as it turns out - some of which the Economic Strategies Committee has been looking into as it charts a blueprint for sustained and inclusive economic growth.
Medium-term concerns
Citigroup economist Kit Wei Zheng recently highlighted in a report a few burning issues - including how an economy fuelled in recent years by a strong influx of foreigners would cope with any tightening of immigration policy, as well as the old bugbears of a growing income divide and the need for demand diversification.
These are concerns over the medium term. More immediate at hand is the possible return, with the GDP numbers now back in the black, of a recent spectre - inflation - and the implications for the strength of the Singapore dollar.
And, indeed, in a quick reversal of circumstances, the return of growth brings with it, too, a likely return of labour tightness and, once again, wage pressures. All that, plus the ever-present angst and anxiety over demand, supply and prices in the property market, and the makings of a bubble.
There's surely a whole lot of more pressing stuff for analysts and economists to mull over than merely to predict the year's GDP growth number.
Source: Business Times, 7 Jan 2010
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