S'pore Growth Could Hit 7.2%

Source : The Straits Times, Jan 14, 2008

Republic will outpace most other regional economies, United Nations report predicts

GENEVA - SPURRED by a shift to more high value-added manufacturing and exports, Singapore's resilient economy will grow by 7.2 per cent this year, outpacing many other economies in the region, a United Nations (UN) report predicts.

Overall, East Asia, heavily influenced by the powerhouse Chinese economy, is expected to grow by 7.7 per cent, outpacing by a wide margin the overall rate of 3.4 per cent forecast for the world. The UN, in its baseline scenario, also expects world trade to expand by 7.1 per cent, down from last year's 7.2 per cent.

The report forecasts that China's economy will grow by 10.1 per cent from 11.4 per cent last year, and neighbouring Hong Kong will expand by 5.7 per cent.

The UN's flagship forecast - Economic Situation And Prospects, 2008, released simultaneously in Geneva and New York - also estimates that Indonesia will expand its economy by 6 per cent this year; Malaysia, 5.8 per cent; Thailand, 4.8 per cent; the Philippines, 6.1 per cent; and Taiwan, 4.4 per cent.

However, the UN warns that there is a risk a deeper housing slump in the United States, coupled with a steep and accelerated fall of the US dollar, could 'trigger a worldwide recession and disorderly adjustment of the global imbalance'.

'There is a clear and present danger of the world economy coming to a near-standstill,' the UN study cautions. 'The domino effect of a US recession would be to knock down export growth from China, Europe and Japan, in turn reducing their demand for exports from developing countries,' it notes.

Dr Hong Pingfan, the chief of global economic monitoring at the UN's department of economic and social affairs in New York, told The Straits Times that 'given the latest data coming in, there is a 50:50 chance of a US recession'.

In the pessimistic scenario, the US economy, which is projected to grow by 2 per cent this year, would contract by 0.1 per cent instead.

The spillover, say the UN analysts, would see world economic growth slow to 1.6 per cent and world trade growth to 4 per cent.

Such a turn of events would result in China's growth contracting by more than 2 percentage points to 8 per cent, and India's, from 8.2 per cent to 6.2 per cent, Dr Hong said.

The UN also projects the euro area would contract from the baseline expansion of 2.5 per cent to 1 per cent, and Japan from 1.7 per cent to 0.7 per cent.

Dr Hong, a US-trained Chinese economist, said the impact would be larger for smaller Asian economies, such as Singapore, with its more open financial markets, and noted that the contraction would result in a drop in growth that would exceed 3 percentage points.