Singapore's economic growth, tipped at 7.0-8.0 percent this year, is expected to slow down next year, reflecting a weaker US economy, the central bank said on Tuesday.
The Monetary Authority of Singapore (MAS) said in its semi-annual Macro-economic Review that economic growth in 2008 is projected at 4.0-6.0 percent. In its review, the MAS described the economic growth this year as "seemingly unrelenting" but with the IT-related cluster, including electronics manufacturing, as the exception.
The cluster's contribution to GDP fell from a 31 per cent average in the last six years to 4 percent in the first half of this year.
The central bank expects the sector to turn around next year as Singapore shifts into new types of products and builds new plants.
Selena Ling, Treasury Economist, OCBC Bank, says: "I think we recognise that electronics sector is a very competitive sector. Of course the pressures are there for Singapore to always move up the value-added chain and I've no doubt that the industry is actually going through a transition. And given that the tech sector has been lagging behind for so many quarters, there should be some light at the end of the tunnel."
The MAS is not ruling out a slowdown in consumer spending in the US nor the risk of higher oil prices.
It expects overall GDP growth to come in at 4.0 to 6.0 percent next year.
This is lower than the 6.5 percent average forecast by economists in a MAS poll taken in September.
Alvin Liew, Global Research Economist, Standard Chartered, says: "Our in-house view for 2008 GDP growth is expected to come in at 5.7 percent, that's on the top half the MAS growth forecast range. We see this slowdown, a few variables is in play, one of it is we're expecting a slower external market growth - we're seeing a moderation in growth in the US markets. Secondly, of course, we're looking at higher oil prices playing a part."
The MAS says CPI inflation is now expected to come in at 1.5 to 2 percent for this year, up from the previous forecast of 0.5 to 1.5 percent.
It expects this to climb to 3.5 percent in the first half of next year, before easing a little in the second half to take overall figure to 2 to 3 percent for 2008.
The MAS also tested the hypothesis that the Asian economy is decoupled from the US economy and it said it found little evidence to support that, although the link has weakened for the short term, mitigated by growth in other parts of the world and demand in this region. - CNA/ch
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