Recession threat recedes, but expect uneven recovery

Integrated resorts, biomed and chemicals will give some boost, Hng Kiang says in economy update

(SINGAPORE) The chances of the economy falling back into recession in 2010 are low, but its recovery in the months ahead is likely to be uneven with the growth momentum slowing in the second half of the year, according to Trade and Industry Minister Lim Hng Kiang.

Economic growth in the coming months may still be derailed if creeping trade protectionism spreads and shrinks global trade, but this likelihood is again low.

'Thanks to the public commitment and exhortations by forums such as the G-20 and Apec, protectionism has largely been kept in check,' Mr Lim told Parliament yesterday. 'The threat today is lower than it was at the start of last year.'

Last year is likely to see the economy contract by 2.1 per cent, according to advance estimates. But Mr Lim said the global economy is turning around.

This was evident in the upturn in Singapore's economy in the second and third quarters of 2009, when the economy posted a sharp rebound of 20.7 per cent and 14.2 per cent quarter-on-quarter growth respectively.

The final quarter saw a 'moderate' dip of 6.8 per cent, but Mr Lim brushed off the setback.

'This does not imply a return to recessionary conditions,' he said. 'Instead, it largely reflects a moderation in the pace of recovery after the exceptionally strong expansion in the previous two quarters.'

His ministry expects the economy to grow 3-5 per cent this year.

'External demand will continue to grow, but at a sluggish pace,' Mr Lim said. 'There will be some support from continued inventory restocking and a resumption in global trade.'

At home, the opening of two plants in the chemicals and biomedical sector, plus the rollout of the integrated resorts, will also provide some boost to growth.

Yet the pace of growth is likely to slow down in the second half of the year - as 'the effects of global fiscal stimulus measures and inventory restocking wane', Mr Lim said.

'In addition, weak household balance sheets and persistently high unemployment, especially in the US, will weigh down on consumer demand in our key export markets,' he added.

The jobless rate in Singapore is also tipped to stay up for 'some time', even as the labour market has stabilised and overall employment expanded in the third quarter of 2009.

Mr Lim noted that the recovery of the job market typically lags behind the recovery of the larger economy.

'There are many jobs available for Singaporeans, at the rank-and-file and PMET (professional, managerial, executive and technician) level,' he said. 'These jobs can be found across a diverse span of industries, such as pharmaceuticals, clean energy, retail, food and beverage, hospitality, healthcare, aerospace, IT and finance. The integrated resorts coming up this year will also be recruiting.'

Mr Lim said Apec, whose leaders last met in Singapore in 2009, will also help to spur growth in the Asia-Pacific region.

He noted that Apec's 21 economies have agreed to make it 25 per cent cheaper, faster and easier to do business in the region by 2015. It has set an interim target of 5 per cent improvement by next year.

'The announced targets will translate into concrete gains for business,' Mr Lim said. 'For example, it could cost on average up to US$450 less to import and export a container of goods in and out of Apec economies. The time taken to start a business within Apec economies could be reduced by one week on average.'

Source: Business Times, 12 Jan 2010