Slowdown To Last Several Quarters

Source : The Business Times, October 6, 2008

But strong fiscal position, diversity will help Singapore weather economic crisis: Tharman

Singapore's economy is expected to slow for 'several quarters' as the sub-prime meltdown has evolved into phase two - an economic crisis, said Finance Minister Tharman Shanmugaratnam.

With Singapore's heavy exposure to the global economy, the country is unlikely to be spared from the expected slowdown across the world, said Mr Tharman, who was speaking to Toa Payoh East residents during a dialogue session yesterday.

'We are now entering the second phase of the crisis,' Mr Tharman told the residents.

'It is no longer just a financial crisis. It is now an economic crisis,' he added, pointing to slowing growth in the US, Europe, Japan, India and China.

'We will also see a slowdown, from all indications, that will last not just one or two quarters, but may last several quarters because we are heavily exposed to the global economy.'

But he expects the country to ride through the crisis with its strong fiscal position and a diversified economy.

'The government is in a strong fiscal position,' he said. 'Frankly, it's just as well that we decided not to spend all of the surplus that we earned last year. We spent some of it, provided some support for households, but we kept some dry powder.'

He said that some sectors, such as the shipping industry and the high value-add manufacturing businesses, continue to thrive despite the crisis. And while the financial sector is expected to slow down, some segments, including private banking and wealth management, continue to show strong growth.

The minister added that although job creation will be affected in the next few quarters, Singapore's starting level of unemployment is much lower those that of other countries.

He noted that the approved US bailout package was just the beginning of work needed to get the American economy back on track.

'Globally, we were relieved that the US Congress came to a decision to support the package because it helps (to) take us forward,' he said. 'The consensus is that more will have to be done.'

Responding to queries on the recent 21 per cent jump in electricity tariffs, Mr Tharman said that next year's utility rebates would factor in this price hike - the sharpest in eight years. 'We know the large increase in the fourth quarter has unsettled many people. We'll take that into consideration in next year's budget.'

The minister said that the increase had been reasonable compared to the estimated 45 per cent spike in oil prices over the last one year. 'Let the realistic price be charged, based on the world market price. But, help our poor people. Those who are wealthier have to pay the world market price.'

Mr Tharman added that that there was a good chance that tariffs could go down if current fuel prices continue stabilising.

When asked if banks could be pushed by the Monetary Authority of Singapore (MAS) to disclose their exact exposure to failed structured products linked to bankrupt Lehman Brothers, Mr Tharman told reporters that there needs to be a balanced use of regulation.

'We've got to avoid swinging in pendulum-like fashion when it comes to regulation,' he said.

He declined to say if there would be further economic growth revision or if the MAS would ease the Sing dollar policy - a consensus forecast by most economists.