Prime Minister Lee Hsien Loong has cautioned Singaporeans to be prepared for a slowing economy in the next few quarters.
Speaking in Malay, Mandarin and English at the May Day Rally, Mr Lee told workers that Singapore's economy may have done well so far in 2008, but developments in the US economy may still have an impact on the country.
Mr Lee gave the stark reminder when he joined more than 1,500 workers at Labour Day celebrations. Mr Lee said the US sub-prime crisis has spread through its banking system and beyond. While the immediate danger is over, there is still the ripple effect.
He painted three scenarios of how the US economy might affect Singapore.
The first scenario is a mild recession but with growth at the end of the year.
Second, if the US problems persist, it'll slow Singapore's growth as well, even going into 2009.
The third scenario is a severe US downturn which most analysts agree is unlikely to happen.
Mr Lee believes the first two scenarios are more likely.
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"For this year, we can still achieve a 4-6 percent growth which MTI (Ministry of Trade and Industry) has projected. But remember, the 4-6 percent (growth) is for the whole year. The first quarter was good, (but for the) second, third and fourth quarters, prepare for a slowdown (which) may last into next year. This is one major uncertainty affecting our economy," said the prime minister.
"Employers and workers have to bear this in mind when you negotiate your CAs (collective agreements) this year. You have to ensure that any built-in wage increases are sustainable and if the companies are still doing well, reward the workers with higher variable bonuses, and keep it flexible," he added.
Another concern is the rising cost of living.
Mr Lee said the government had just given out the first instalment of Growth Dividends to some 2.4 million Singaporeans. The second payment is due in October.
Overall, each household can expect some S$5,000 to cope with the rising costs.
On the issue of foreign labour, PM Lee said foreign workers are willing to work longer hours to keep the airport, factories and hotels open 24 hours a day throughout the year. That gives Singapore a more competitive edge, he said, adding that keeping foreign workers away is not the answer.
"It's because we have the foreign workers here, that's why our economy has grown, that's why the employers, ...companies are here, and that's why Singaporeans have jobs. You send away the foreign workers,... a few hundred thousand (of them), Singaporeans (won't) go into those jobs, the companies will close or leave. I think the Singaporeans unemployment will go up, and hardship will go up," said PM Lee.
For those who have difficulty finding jobs, Mr Lee said there are many schemes to help them get employed. For example, the Workfare Income Supplement gave out S$300 million this year, benefiting some 300,000 low-wage workers.
More jobs are also on the horizon, with some 10,000 available at the Marina Bay Integrated Resort. - CNA /ls
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