Government sticking with growth forecast of 4.5%-6.5% despite fears of US slowdown
PARIS - PRIME Minister Lee Hsien Loong has said that he is confident Singapore will be able to weather the current turmoil in global financial markets and continue to do well economically this year.
While Singapore and Asia could not be sheltered from the 'chill winds' buffeting the world economy, and would be hit in the likelihood that the US economy goes into a recession, they were in a good position to face the economic storm ahead. He said he was 'confident that we are going to be able to weather this storm'.
Addressing a meeting of French business leaders yesterday, he gave several reasons why he remained bullish about Singapore and Asia, even as he gave a sober assessment of the economic impact of the drubbing that global markets took earlier this week.
Describing Monday as something of a 'disaster' in Singapore, which saw its worst one-day share price plunge since 1987, he said that the world's capital markets were now linked as one common pool of global funds, and there was no way they could be delinked, as some economists had suggested.
Singapore and Asian economies would be hit if the United States were to be plunged into a recession, as seems likely, he said. The US remains a major market for many Asian countries
With Singapore's economy completely open to the world, and its external trade 31/2 times the size of its gross domestic product, there was 'nowhere you can shelter from the wind chill'.
But PM Lee explained why he remained confident despite this.
He said Singapore's efforts to restructure and upgrade its economy in recent years were paying off with a good stream of high quality investments, which would generate jobs and opportunities for Singaporeans.
He cited the plans by Norway's Renewable Energy Corporation to build the world's largest solar panel plant in Singapore, and also French company Soitec, which was constructing a major wafer fab plant.
Other projects, such as the $1.87 billion sports hub to be built by French firm Dragages, and work on the two integrated resorts would keep the construction industry more than busy for now.
The Republic was also increasingly linked to China and India, where robust domestic demand would continue to generate growth and boost Singapore and others in the region.
Singapore's role as a regional service hub would ensure that the financial, transport and tourism sectors continue to do well. Major events such as next month's Singapore Air Show and September's Formula One race would give tourism a further boost.
Mr Lee added that four years of strong growth, from 2004 to last year, had 'put us in a strong position'.
Other positive factors included the fact that Asian banks had been slow to embrace some of the new and more risky financial instruments, and so were limited in their exposure to the 'sub-prime' or risky loans made by some US banks, which have contributed to the current market uncertainty.
Mr Lee also saw as a plus the Federal Reserve's unprecedented 75 basis-point interest rate cut in between its regular meetings, as well as the Bush administration's move to put together an economic stimulus package, which he hoped would be 'passed expeditiously' by Congress.
Despite the market volatility, Mr Lee said the government would not make a 'knee-jerk' reaction and would stick with its growth forecast of 4.5-6.5 per cent for the year for now.
Mr Lee left Paris later yesterday for Davos, Switzerland, to attend the World Economic Forum meeting.
Speaking in Riyadh, Minister Mentor Lee Kuan Yew also gave his assessment of the impact of a possible US recession on Asia.
He said that while the Chinese and Indian economies were not immune to a US slowdown, he believed they were now much less influenced by a US recession because they have got enough going in their own internal economies.
'They can increase investments in infrastructure, they can increase consumption, they can increase all their projects and keep the economy buoyant. And if they can keep their economy up, say, instead of making 11, 12 per cent, they make 8, 9 per cent, then we will not go down so much. But that may take one, two years before we see the results.'
UP TO THE CHALLENGE
'I am confident that we are going to be able to weather this storm.
This is not like the 1997 financial crisis, and we got through that. That was all around us, and we were at ground zero.
This is something broader, and in Asia, I think we are stronger, we are better prepared, and we will weather it.'
PM LEE
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