S'pore Doing Okay, But Much Hinges On How US Performs

Source : The Straits Times, May 2, 2008

THE economy has done all right so far, growing 7.2 per cent in the first three months.

But Singaporeans will have to stay prepared and be on guard for possible slowdowns for the rest of the year and maybe into next year - depending on how the United States' economy performs.

Giving his take on the impact here of an economic downturn in the US, Prime Minister Lee Hsien Loong said that it would depend on the shape of the slowdown.

'V' is the best shape, as it would indicate the US economy bouncing back in the second half of the year and growth getting back on track later in the year.

But it could easily become U-shaped because the underlying problems in the US housing market have not been solved.

'The actions that have been taken have been bold. But they haven't solved the fundamental problems,' Mr Lee said of Washington's responses.

'They've only postponed these problems into the future to give more time to manage them and massage them away.'

If that means taking more time to sort out the US economy, even into next year, Singapore too will be slowed down significantly.

But the most gloomy, he said, is an L-shaped downturn of the kind Japan experienced in the 1990s, from which it did not pull out for some 10 years.

'If that happens in America, then America is in trouble. So too Europe, so too Japan. And Singapore will be caught up in this and we will be in serious difficulties too,' he said.

'But, fortunately, most analysts don't think this is on the cards.'

Mr Lee expects a V-shaped downturn 'if we're lucky'.

He remains confident Singapore's economy can achieve the 4 per cent to 6 per cent growth that has been forecast, and noted the good performance of the first three months.

But the country needs to plan ahead and be prepared if the slowdown turns out to be U-shaped instead.

Assessing the impact on industries, he said sectors like construction, marine engineering and the port will continue to do well.

But others, such as tourism, financial services and perhaps information technology, could be more seriously hit.

'So this is one major uncertainty affecting our economy,' he said, adding that bosses and workers must bear this in mind when they negotiate wage changes this year.

They must ensure that any built-in wage increases are sustainable. Companies which still do well should reward workers with higher variable bonuses.

'Keep it flexible,' he advised. 'So just in case things turn wrong, you don't have to disappoint the workers and take back something which has already been given.'

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NO DIVISIONS, PLEASE

'Many of our colleagues are foreign workers. We must be fair and respect their contributions. We should aim for Singaporeans and foreigners to be one community so that it is one harmonious Singapore.' - MR GARY HARIS, 33, union leader at Union of Security Employees


FOREIGN WORKERS BRING GROWTH

'It will be difficult without foreign workers. A lot of Singaporeans do not like to work in the shipyard. With foreign workers, our company can grow.' - MR ALIAS TALIB, 44, general treasurer of Keppel Fels Employees' Union. Six in 10 of its 3,500 members are from Bangladesh, India, China, Myanmar and the Philippines.