Growth will slow for "several quarters", said MTI minister
SINGAPORE'S economy, already in a technical recession, is likely to see weak growth in the next few quarters due to the unfolding impact from the global financial crisis, said Trade and Industry Minister Lim Hng Kiang on Monday.
Trade Minister Lim Hng Kiang said while Singapore's inflation, which hit a 26-year high of 7.5 per cent in April, May and June, will continue to ease, it will take time for the decline in prices to be reflected in the consumer price index. -- ST PHOTO: JOYCE HUANG'We must be prepared for weaker growth in the next few quarters, and possibly longer depending on when the global economy recovers,' he told Parliament when replying to questions from MPs on how singapore has been affected by the global turmoil.
'Singapore's economy is small, open and closely linked to the global economy, said Mr Lim.
'We cannot escape the impact of the global financial crisis and economic slowdown.'
Mr Lim said the slowing economy has already affected the labour market 'Employers are exercising more caution in their hiring, with most employers preferring to keep their headcount steady,' he said.
'Given that the economic weakness is expected to continue into 2009, moderation in employment growth is expected in the second-half of 2008 through to 2009,' he said.
For 2008, the unemployment rate is likely to exceed the 2.1 per cent recorded in 2007, said Mr Lim.
He said the number of retrenchments in Singapore has stayed at the same level as in previous quarters, but it may climb as the economy slows further.
'Moderation of employment growth is expected in the second half of 2008, and through to 2009,' said the minister.
Figures released earlier this month showed Singapore has entered into a technical recession, generally defined as two consecutive quarters of contraction in economic output.
The economy shrank by 6.3 per cent in the third quarter after contracting 5.7 perc ent in the previous quarter, preliminary data from the ministry of trade and industry released this month showed.
For 2008, the ministry has downgraded its 2008 growth targets to 3.0 per cent from 4.0-5.0 per cent, citing the global slowdown as the reason behind the revised forecast.
On inflation, which hit a 26-year high of 7.5 percent in April, May and June, Mr Lim said it will continue to ease, but it will take time for the decline in prices to be reflected in the consumer price index.
'I must caution that inflation will continue to be sticky for the next few months,' Mr Lim said, adding authorities were 'confident inflation will revert back to 2-3 percent' next year.
Singapore's central bank said on Oct 10 it expects inflation to remain within the 6-7 per cent target for 2008, and forecast inflation to ease to 2.5-3.5 per cent in 2009.
Mr Lim said Singapore's three local banks DBS , United Overseas Bank and Oversea-Chinese Banking Corp are well capitalised and their asset quality remains strong despite the problems in the United States.
'Banks and insurance companies in Singapore do not have large exposures to either US mortgage-related securities orto the institutions that have failed,' saidMr Lim, who is also deputy chairman of the city-state's central bank.
In a nod that slowing growth posed a greater risk to Singapore's economy than rising prices, Singapore's central bank eased monetary policy for the first time since 2003 in October. -- AFP, REUTERS
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