Source : The Business Times, February 15, 2008
Sim Lian unit's offer is whopping 63% above second highest bid
A 60-YEAR leasehold industrial site at Playfair Road has attracted a top bid of $142 per square foot per plot ratio (psf ppr) from Sim Lian Development unit Trio Link Development - a record price for such a site in the Ubi/Paya Lebar/Eunos area.
The tender for the 92,870 sq ft reserve-list plot attracted 12 bids, reflecting growing interest in industrial property as it comes into play amid the breather in residential and office values, says Colliers International director (industrial) Tan Boon Leong.
Sim Lian's top bid of $33 million, or $142.13 psf ppr, was a huge 63 per cent above the next highest bid of $20.23 million, or $87.13 psf ppr, by Orion-Three Development.
Orion group, which is linked to Indonesian interests, has also been active in state tenders for industrial sites. It clinched plots at Serangoon North Ave 4 and Changi North St 1 in 2006.
Asked about Sim Lian's aggressive bidding in yesterday's tender, executive director Ken Kuik said the company had been encouraged by recent demand for strata-titled flatted and ramp-up factories at its Vertex project at Ubi Ave 4/Ubi Link.
'We've sold about 160 of the 200 units released since September last year, achieving an average price of about $330 psf,' he said.
The eight-storey property has 552 strata-titled units. Sim Lian is developing it on a 60-year leasehold site it won at a state tender in 2006.
Like the Playfair Road site contested yesterday, the Ubi plot is zoned for Business 1, allowing clean and light industrial and warehouse uses.
Mr Kuik said Sim Lian plans to develop the Playfair Road plot into a 13-storey project with strata-titled units for sale.
He noted that the site is just a few minutes' walk from Upper Paya Lebar MRT Station on the Circle Line.
Colliers' Mr Tan estimates Sim Lian's breakeven cost could be around $260 psf, considering the saleable area for such industrial developments can exceed the maximum permitted gross floor area by 15-20 per cent after factoring in features like terraced areas and air-con ledges.
'This is the first time a 60-year leasehold industrial site is being sold in the area, which traditionally has freehold industrial properties. That may have added to the plot's attraction,' he suggested.
Property consultants say the $142 psf ppr that Sim Lian offered for the Playfair plot surpasses the last high achieved in the Ubi/Paya Lebar/Eunos area - $85.50 psf ppr for a 60-year plot at Eunos Link/Kaki Bukit Avenue 1 in 1996.
However, yesterday's top bid is still shy of the island-wide high of $170 psf ppr achieved late last year for a 30-year leasehold site near Commonwealth MRT Station.
The other bidders in yesterday's tender were KNG Development, Soilbuild Group, Prosperity Realty (linked to Hotel Royal's Lee family), HLH Development & Brothers (Holdings), Superbowl Land, See Young Investments, Lian Beng Group unit LB Property, Boustead Projects, Boon Keng Development and Lim Huay Ren, which placed the lowest bid of $12 million or $51.68 psf ppr.
Friday, February 15, 2008
F&N Posts 41.8% Rise In Q1 Net Profit To $108.6m
Source : The Business Times, February 15, 2008
FRASER & Neave has gotten off to a good start in the current financial year by reporting a 41.8 per cent jump in net profit to $108.6 million for the first quarter ended Dec 31, 2007, from $76.6 million for the previous corresponding period.
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The profit attributable to shareholders included an exceptional gain of $5.4 million mainly from the disposal of properties. But even without including exceptional items, net profit for the quarter surged 33.2 per cent to $103.2 million from $77.5 million.
'This impressive profit growth stemmed from the progressive recognition of development property income and continued growth in food and beverage,' said the property, publishing and food and beverage group. Turnover for the quarter climbed 19.2 per cent to $1.32 billion from $1.11 billion the year before.
Earnings per share after exceptional items rose to 7.8 cents from 6.5 cents despite the increase in issued share capital, almost all attributable to the 14.9 per cent stake sold to Temasek Holdings. Net asset value per share strengthened to $3.81 from end-September 2007's $3.77.
Former SingTel head Lee Hsien Yang, who took over the chairmanship of F&N on Oct 15, said: 'The robust profit growth in this quarter clearly supports our strategy of industry-cum-geographical diversification. Our businesses in the core markets of Singapore, Malaysia, Indochina and Australia have all contributed strongly to the sterling results.
'The profit performance was led by the property division which has benefited from strong profits booked from earlier sales launches in Singapore and healthy rental rates achieved from new and renewed leases. The food & beverage division continued to benefit from its regional expansion strategy and turned in a set of sterling results.'
The property division saw profit before interest and tax (PBIT) rising 15 per cent to $66 million, benefiting from higher development margins.
During the quarter, the group secured a residential site at Boon Lay/Lakeside Drive through a tender, covering some 830,000 square feet of developable area. This mid-end segment site is expected to yield a potential pipeline of over 600 units. Including this, the group now has a total land bank of close to 3,000 residential units with total estimated saleable area of four million sq ft. Overseas, in China, Australia and Britain, it has over 34 million sq ft of residential and commercial development space.
Beer maker Asia Pacific Breweries, which is nearly 40 per cent owned by F&N, also delivered a healthy set of results with Q1 net earnings (after exceptionals) attributable to shareholders going up 5.4 per cent to $42.6 million from $40.4 million on a 19 per cent rise in turnover to $567.8 million.
Its chief executive Koh Poh Tiong said: 'Once again, Indochina (ie Cambodia, Laos and Vietnam) has excelled as our best performing region, reporting a robust volume growth of 37 per cent and a PBIT gain of 23 per cent . . . This stronger set of numbers is a testament to our intra-market growth strategy.'
F&N's soft drinks side grew 12 per cent in revenue on higher volume and a price increase but this was offset by higher raw material prices and input costs resulting in PBIT going up only 10 per cent.
The dairies division saw consolidated revenue rising twofold to $254 million but PBIT was a lesser 84 per cent to $7.5 million due to lower margins from its Thai operations and higher raw material and packaging costs.
Its glass containers segment registered revenue and PBIT growth of 10 per cent and 19 per cent, to $35 million and $4 million.
Revenue and PBIT for the publishing and printing segment declined by 2 per cent and 7 per cent respectively, due to the divestment of the Australia printing plant and lower profit from its printing division.
On the Singapore Exchange yesterday, APB saw its share price rise six cents to $13.56 while F&N ended 22 cents up at $4.93.
FRASER & Neave has gotten off to a good start in the current financial year by reporting a 41.8 per cent jump in net profit to $108.6 million for the first quarter ended Dec 31, 2007, from $76.6 million for the previous corresponding period.
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The profit attributable to shareholders included an exceptional gain of $5.4 million mainly from the disposal of properties. But even without including exceptional items, net profit for the quarter surged 33.2 per cent to $103.2 million from $77.5 million.'This impressive profit growth stemmed from the progressive recognition of development property income and continued growth in food and beverage,' said the property, publishing and food and beverage group. Turnover for the quarter climbed 19.2 per cent to $1.32 billion from $1.11 billion the year before.
Earnings per share after exceptional items rose to 7.8 cents from 6.5 cents despite the increase in issued share capital, almost all attributable to the 14.9 per cent stake sold to Temasek Holdings. Net asset value per share strengthened to $3.81 from end-September 2007's $3.77.
Former SingTel head Lee Hsien Yang, who took over the chairmanship of F&N on Oct 15, said: 'The robust profit growth in this quarter clearly supports our strategy of industry-cum-geographical diversification. Our businesses in the core markets of Singapore, Malaysia, Indochina and Australia have all contributed strongly to the sterling results.
'The profit performance was led by the property division which has benefited from strong profits booked from earlier sales launches in Singapore and healthy rental rates achieved from new and renewed leases. The food & beverage division continued to benefit from its regional expansion strategy and turned in a set of sterling results.'
The property division saw profit before interest and tax (PBIT) rising 15 per cent to $66 million, benefiting from higher development margins.
During the quarter, the group secured a residential site at Boon Lay/Lakeside Drive through a tender, covering some 830,000 square feet of developable area. This mid-end segment site is expected to yield a potential pipeline of over 600 units. Including this, the group now has a total land bank of close to 3,000 residential units with total estimated saleable area of four million sq ft. Overseas, in China, Australia and Britain, it has over 34 million sq ft of residential and commercial development space.
Beer maker Asia Pacific Breweries, which is nearly 40 per cent owned by F&N, also delivered a healthy set of results with Q1 net earnings (after exceptionals) attributable to shareholders going up 5.4 per cent to $42.6 million from $40.4 million on a 19 per cent rise in turnover to $567.8 million.
Its chief executive Koh Poh Tiong said: 'Once again, Indochina (ie Cambodia, Laos and Vietnam) has excelled as our best performing region, reporting a robust volume growth of 37 per cent and a PBIT gain of 23 per cent . . . This stronger set of numbers is a testament to our intra-market growth strategy.'
F&N's soft drinks side grew 12 per cent in revenue on higher volume and a price increase but this was offset by higher raw material prices and input costs resulting in PBIT going up only 10 per cent.
The dairies division saw consolidated revenue rising twofold to $254 million but PBIT was a lesser 84 per cent to $7.5 million due to lower margins from its Thai operations and higher raw material and packaging costs.
Its glass containers segment registered revenue and PBIT growth of 10 per cent and 19 per cent, to $35 million and $4 million.
Revenue and PBIT for the publishing and printing segment declined by 2 per cent and 7 per cent respectively, due to the divestment of the Australia printing plant and lower profit from its printing division.
On the Singapore Exchange yesterday, APB saw its share price rise six cents to $13.56 while F&N ended 22 cents up at $4.93.
Why S'pore Trade Breaks Ranks With GDP
Source : The Business Times, February 15, 2008
Three researchers shed light on a conundrum
Three researchers have explained in an article yesterday why Singapore's GDP and trade growth diverged in the past year.
The two figures have tended to move in lock step for export-reliant Singapore, whose small, open economy depends significantly on external growth drivers.
But last year, while real GDP climbed 7.7 per cent, total trade growth - exports plus imports of goods - fell sharply from 13 per cent in 2006 to just 4.5 per cent.
In part, this was due to different performances across sectors, said the researchers, two of whom are from the Ministry of Trade and Industry and the third from International Enterprise Singapore.
Last year's aces - financial services and construction, output of which grew 18 per cent - did not contribute to goods exports and, hence, headline trade growth.
On the other hand, the laggards - manufacturing and wholesale trade, which grew just 6.4 per cent - were the main drivers of the goods exporting sectors.
Another reason for the divergence, according to the article, was a measurement effect, as GDP and trade are calculated on different terms.
Real GDP measures, roughly speaking, the volume of Singapore's output. But trade figures measure the value of exports and imports at current prices and are affected by price changes.
And last year, prices of semiconductors slumped due to increased competition and a capacity glut, dragging down the dollar value of trade.
Despite 4 per cent growth in electronics output, electronics domestic exports still fell 9.3 per cent year on year, meaning higher volume was insufficient to offset the fall in price.
The effect was significant, as electronics trade accounted for about 40 per cent of total trade.
And although oil and commodity prices climbed significantly last year, this could not compensate for falling electronics prices. Oil exports make up about 25 per cent of domestic exports.
The article shows that with prices held constant, total trade last year would have grown 7 per cent - close to real GDP growth.
The divergence between real GDP and trade growth is unlikely to lend credence to the decoupling theory - the idea that strong domestic demand might reduce Singapore's reliance on exports.
Separately, Citigroup economist Kit Wei Zheng said: 'Singapore is still a very open economy. The indirect knock-on effects will still be quite important.'
HSBC economist Prakriti Sofat pointed out that while US growth slowed substantially in Q4 2007, Singapore exports to the United States actually grew about 0.6 per cent year on year, compared with a 4 per cent slump in Q3.
'The other point is that personal consumption has been weak despite hefty wage gains, which has been quite puzzling,' she said. 'However, our assumption remains that households should let loose the purse strings in the period ahead.'
Three researchers shed light on a conundrum
Three researchers have explained in an article yesterday why Singapore's GDP and trade growth diverged in the past year.
The two figures have tended to move in lock step for export-reliant Singapore, whose small, open economy depends significantly on external growth drivers.
But last year, while real GDP climbed 7.7 per cent, total trade growth - exports plus imports of goods - fell sharply from 13 per cent in 2006 to just 4.5 per cent.
In part, this was due to different performances across sectors, said the researchers, two of whom are from the Ministry of Trade and Industry and the third from International Enterprise Singapore.
Last year's aces - financial services and construction, output of which grew 18 per cent - did not contribute to goods exports and, hence, headline trade growth.
On the other hand, the laggards - manufacturing and wholesale trade, which grew just 6.4 per cent - were the main drivers of the goods exporting sectors.
Another reason for the divergence, according to the article, was a measurement effect, as GDP and trade are calculated on different terms.
Real GDP measures, roughly speaking, the volume of Singapore's output. But trade figures measure the value of exports and imports at current prices and are affected by price changes.
And last year, prices of semiconductors slumped due to increased competition and a capacity glut, dragging down the dollar value of trade.
Despite 4 per cent growth in electronics output, electronics domestic exports still fell 9.3 per cent year on year, meaning higher volume was insufficient to offset the fall in price.
The effect was significant, as electronics trade accounted for about 40 per cent of total trade.
And although oil and commodity prices climbed significantly last year, this could not compensate for falling electronics prices. Oil exports make up about 25 per cent of domestic exports.
The article shows that with prices held constant, total trade last year would have grown 7 per cent - close to real GDP growth.
The divergence between real GDP and trade growth is unlikely to lend credence to the decoupling theory - the idea that strong domestic demand might reduce Singapore's reliance on exports.
Separately, Citigroup economist Kit Wei Zheng said: 'Singapore is still a very open economy. The indirect knock-on effects will still be quite important.'
HSBC economist Prakriti Sofat pointed out that while US growth slowed substantially in Q4 2007, Singapore exports to the United States actually grew about 0.6 per cent year on year, compared with a 4 per cent slump in Q3.
'The other point is that personal consumption has been weak despite hefty wage gains, which has been quite puzzling,' she said. 'However, our assumption remains that households should let loose the purse strings in the period ahead.'
Govt Raises Inflation Forecast, Sees Peak In H1
Source : The Business Times, February 15, 2008
Forecast upped to 4.5-5.5% as S'pore feels effect of rising food and oil prices
Singapore's inflation will get worse before it gets better, the Ministry of Trade and Industry (MTI) said yesterday, expecting inflation to peak in the first half of 2008 before moderating in the second half.
The government raised its full-year forecast for the headline consumer price index (CPI) to 4.5-5.5 per cent, from 3.5-4.5 per cent previously.
Rising food and oil prices globally have filtered through to domestic prices of food and oil-related items here, MTI said.
Last year, Singapore's CPI grew 2.1 per cent year-on-year after growing by one per cent in 2006. It hit a 25-year high in December when it grew 4.4 per cent year-on-year. It rose 4.1 per cent for the fourth quarter.
MTI second permanent secretary Ravi Menon noted that part of the increase in the headline inflation here was due to the one-off effect of the two percentage-point hike since last July and technical factors like the revision of annual values of HDB flats.
'We expect inflation to get worse before it gets better,' he said at a media briefing yesterday. 'The revised forecast is premised on fairly high inflation rates in the next few months. This is only to be expected given the very low base in the first half of last year.'
While inflation is expected to taper off in the second half during which the effect of the GST hike wanes, a return to the low inflation rates enjoyed in recent years will not happen any time soon as commodity prices are still likely to rise albeit at a slower pace than in 2007, Mr Menon added.
When asked if the Monetary Authority of Singapore (MAS) would be prompted to change its monetary policy stance given the higher inflation outlook, MAS deputy managing director Ong Chong Tee said the current monetary policy stance 'remains appropriate and the macroecnomic and inflation outlook has been broadly consistent with the planning parameters'.
This policy of a modest and gradual appreciation of the S$NEER policy band has been in place since April 2004.
Mr Menon noted that the current inflation outlook has to be viewed in the context of historically low inflation.
For the last 40 years, Singapore's inflation rate averaged 1.5 per cent, excluding the two oil shocks in the mid 1970s and early 1980s. Average inflation for the past 10 years was half that rate at 0.7 per cent due to the weak global demand in the aftermath of the Asian financial crisis, the downswing of the technology cycle and disinflationary impact from the emergence of China and other economies.
After years of low inflation, the world is now returning to 'a more normal inflation environment,' Mr Menon said.
But he added that the fact that long-term bond yields remain low and reflect that despite the current spike in inflation, the long-term inflation outlook remains low. And as long as jobs are created and wages grow, the impact of inflationary pressures will be dampened.
A recent report released by the Department of Statistics shows that household income has risen faster than inflation. Average household income from work was 32.4 per cent higher than 10 years ago, while consumer prices rose by a smaller 7.6 per cent over the same period.
Ministry of Manpower divisional director (manpower planning and policy) Jeffrey Wong said he expects employment growth to be sustained into 2008, after adding a record 236,600 jobs in 2007.
Forecast upped to 4.5-5.5% as S'pore feels effect of rising food and oil prices
Singapore's inflation will get worse before it gets better, the Ministry of Trade and Industry (MTI) said yesterday, expecting inflation to peak in the first half of 2008 before moderating in the second half.
The government raised its full-year forecast for the headline consumer price index (CPI) to 4.5-5.5 per cent, from 3.5-4.5 per cent previously.
Rising food and oil prices globally have filtered through to domestic prices of food and oil-related items here, MTI said.
Last year, Singapore's CPI grew 2.1 per cent year-on-year after growing by one per cent in 2006. It hit a 25-year high in December when it grew 4.4 per cent year-on-year. It rose 4.1 per cent for the fourth quarter.
MTI second permanent secretary Ravi Menon noted that part of the increase in the headline inflation here was due to the one-off effect of the two percentage-point hike since last July and technical factors like the revision of annual values of HDB flats.
'We expect inflation to get worse before it gets better,' he said at a media briefing yesterday. 'The revised forecast is premised on fairly high inflation rates in the next few months. This is only to be expected given the very low base in the first half of last year.'
While inflation is expected to taper off in the second half during which the effect of the GST hike wanes, a return to the low inflation rates enjoyed in recent years will not happen any time soon as commodity prices are still likely to rise albeit at a slower pace than in 2007, Mr Menon added.
When asked if the Monetary Authority of Singapore (MAS) would be prompted to change its monetary policy stance given the higher inflation outlook, MAS deputy managing director Ong Chong Tee said the current monetary policy stance 'remains appropriate and the macroecnomic and inflation outlook has been broadly consistent with the planning parameters'.
This policy of a modest and gradual appreciation of the S$NEER policy band has been in place since April 2004.
Mr Menon noted that the current inflation outlook has to be viewed in the context of historically low inflation.
For the last 40 years, Singapore's inflation rate averaged 1.5 per cent, excluding the two oil shocks in the mid 1970s and early 1980s. Average inflation for the past 10 years was half that rate at 0.7 per cent due to the weak global demand in the aftermath of the Asian financial crisis, the downswing of the technology cycle and disinflationary impact from the emergence of China and other economies.
After years of low inflation, the world is now returning to 'a more normal inflation environment,' Mr Menon said.
But he added that the fact that long-term bond yields remain low and reflect that despite the current spike in inflation, the long-term inflation outlook remains low. And as long as jobs are created and wages grow, the impact of inflationary pressures will be dampened.
A recent report released by the Department of Statistics shows that household income has risen faster than inflation. Average household income from work was 32.4 per cent higher than 10 years ago, while consumer prices rose by a smaller 7.6 per cent over the same period.
Ministry of Manpower divisional director (manpower planning and policy) Jeffrey Wong said he expects employment growth to be sustained into 2008, after adding a record 236,600 jobs in 2007.
Slower Growth, Higher Prices And Uphill Climb Ahead
Source : The Business Times, February 15, 2008
2008 growth forecast cut to 4-6% in shadow of US uncertainty
The Singapore economy will see lower growth and higher inflation this year, but remains well-poised to ride the upturn when it comes, says the Ministry of Trade and Industry (MTI). Most economists agree.
In view of heightened risks in recent months, chiefly a sharp US slowdown, MTI has shaved its forecast of Singapore's 2008 GDP growth by half a percentage point to 4-6 per cent, which would be down a few notches from 2007's revised 7.7 per cent pace.
The previous 2008 forecast in November had already factored in a US slowdown, MTI second permanent secretary Ravi Menon explained at a media briefing yesterday on the 2007 economic results.
But downside risks have since risen. And while it is not known if the US economy is in fact in recession, 'what we do know is that the US is already experiencing a significant slowdown in growth, and the key uncertainty now is the length and severity of this slowdown', said Mr Menon.
The new official 4-6 per cent growth forecast captures two scenarios. The brighter outlook sees - as current conditions suggest, by MTI's reading - the United States tackling a mild recession in the first half but recovering in the second half on the back of strong fundamentals, and fiscal and monetary stimulus.
Singapore will then likely grow in the upper half of the 4-6 per cent forecast, supported by healthy, if slower, growth in Europe and Japan, and a robust Asia.
But if the US falls into a severe recession brought on by a prolonged credit crunch, with knock-on effects in Europe and Asia, 'sentiment-sensitive and external-oriented' sectors in Singapore, such as electronics, wholesale trade and financial services, will be hit hardest, said Mr Menon.
Even sectors with more of a regional exposure, such as health care and tourism, will not be totally unscathed. The Singapore economy will then likely grow nearer the 4 per cent end of the forecast range.
'In either scenario, we're looking at slower growth this year,' he said.
Already, GDP growth slowed to 5.4 per cent in Q4 last year - down from Q3's 9.5 per cent pace, and lower than early estimates of 6 per cent for Q4. On a quarter-on-quarter basis, GDP contracted by 4.8 per cent.
According to MTI, the Q4 slowdown reflected more the plunge in biomedical manufacturing - which fell nearly 30 per cent in Q4 because of cyclical pharmaceutical downtime - rather than any impact from the US.
Asked about the chances of Singapore slipping into a technical recession - if the economy sees a second consecutive negative quarter in quarter-on-quarter terms - Mr Menon said: 'Most of the simulations we have done don't show that outcome.'
MTI's economics and strategy director, Cheang Kok Chung, also declared it 'quite unlikely', adding that there is 'good potential' for a biomedical rebound in Q1.
In fact, some of the more upbeat private sector economists see a quick rebound in GDP - in the current quarter.
While OCBC Bank's treasury economist Selena Ling thinks the slowing growth momentum from Q4 2007 'could bleed over into Q1 2008', others such as HSBC's Prakriti Sofat see the Singapore economy bouncing back strongly in Q1. One reason - she is confident of a pharmaceutical turnaround 'over the next few months'.
A recent Merrill Lynch report also voiced confidence that the Singapore economy is 'well-positioned to cope with a US downturn this time'.
And P K Basu, the ever bullish chief economist (Asia ex-Japan) of Daiwa Institute of Research, declares: 'I see no reason for even one iota of pessimism about the Singapore economy.'
Apart from the pharmaceutical bleed, Q4 was hardly a weak quarter at all, he says, pointing out that the rest of the economy, notably electronics, was 'accelerating'.
But the 'most eye-popping number', Mr Basu said, was the Q4 manufacturing investment commitments of $8.7 billion - that spells jobs and output down the road.
Depending on the pharma sector rebound, he reckons GDP growth could hit 7-8 per cent in Q1.
'I see no significant downside risk to my 7.4 per cent GDP growth forecast for 2008,' he tells BT.
MTI - which yesterday also raised its 2008 inflation forecast for Singapore to 4.5-5.5 per cent - would be cheered by such confidence.
'Growth will be lower and inflation higher, not a great combination,' Mr Menon said. But the slowdown - after four years of above-trend growth - towards the economy's underlying potential will help ease supply-side constraints and relieve cost pressures, he added.
Beyond 2008, the economy is well-positioned for any pick-up, he said. 'Notwithstanding the weakened macroeconomic picture, the economy remains in fundamentally good shape structurally.'
Rising costs - and Singapore's ever-strong fiscal balances - set the stage for the Budget today. Rebates and other goodies for lower-income households, as well as a cut in the personal income tax rate, are widely anticipated.
2008 growth forecast cut to 4-6% in shadow of US uncertainty
The Singapore economy will see lower growth and higher inflation this year, but remains well-poised to ride the upturn when it comes, says the Ministry of Trade and Industry (MTI). Most economists agree.
In view of heightened risks in recent months, chiefly a sharp US slowdown, MTI has shaved its forecast of Singapore's 2008 GDP growth by half a percentage point to 4-6 per cent, which would be down a few notches from 2007's revised 7.7 per cent pace.
The previous 2008 forecast in November had already factored in a US slowdown, MTI second permanent secretary Ravi Menon explained at a media briefing yesterday on the 2007 economic results.
But downside risks have since risen. And while it is not known if the US economy is in fact in recession, 'what we do know is that the US is already experiencing a significant slowdown in growth, and the key uncertainty now is the length and severity of this slowdown', said Mr Menon.
The new official 4-6 per cent growth forecast captures two scenarios. The brighter outlook sees - as current conditions suggest, by MTI's reading - the United States tackling a mild recession in the first half but recovering in the second half on the back of strong fundamentals, and fiscal and monetary stimulus.
Singapore will then likely grow in the upper half of the 4-6 per cent forecast, supported by healthy, if slower, growth in Europe and Japan, and a robust Asia.
But if the US falls into a severe recession brought on by a prolonged credit crunch, with knock-on effects in Europe and Asia, 'sentiment-sensitive and external-oriented' sectors in Singapore, such as electronics, wholesale trade and financial services, will be hit hardest, said Mr Menon.
Even sectors with more of a regional exposure, such as health care and tourism, will not be totally unscathed. The Singapore economy will then likely grow nearer the 4 per cent end of the forecast range.
'In either scenario, we're looking at slower growth this year,' he said.
Already, GDP growth slowed to 5.4 per cent in Q4 last year - down from Q3's 9.5 per cent pace, and lower than early estimates of 6 per cent for Q4. On a quarter-on-quarter basis, GDP contracted by 4.8 per cent.
According to MTI, the Q4 slowdown reflected more the plunge in biomedical manufacturing - which fell nearly 30 per cent in Q4 because of cyclical pharmaceutical downtime - rather than any impact from the US.
Asked about the chances of Singapore slipping into a technical recession - if the economy sees a second consecutive negative quarter in quarter-on-quarter terms - Mr Menon said: 'Most of the simulations we have done don't show that outcome.'
MTI's economics and strategy director, Cheang Kok Chung, also declared it 'quite unlikely', adding that there is 'good potential' for a biomedical rebound in Q1.
In fact, some of the more upbeat private sector economists see a quick rebound in GDP - in the current quarter.
While OCBC Bank's treasury economist Selena Ling thinks the slowing growth momentum from Q4 2007 'could bleed over into Q1 2008', others such as HSBC's Prakriti Sofat see the Singapore economy bouncing back strongly in Q1. One reason - she is confident of a pharmaceutical turnaround 'over the next few months'.
A recent Merrill Lynch report also voiced confidence that the Singapore economy is 'well-positioned to cope with a US downturn this time'.
And P K Basu, the ever bullish chief economist (Asia ex-Japan) of Daiwa Institute of Research, declares: 'I see no reason for even one iota of pessimism about the Singapore economy.'
Apart from the pharmaceutical bleed, Q4 was hardly a weak quarter at all, he says, pointing out that the rest of the economy, notably electronics, was 'accelerating'.
But the 'most eye-popping number', Mr Basu said, was the Q4 manufacturing investment commitments of $8.7 billion - that spells jobs and output down the road.
Depending on the pharma sector rebound, he reckons GDP growth could hit 7-8 per cent in Q1.
'I see no significant downside risk to my 7.4 per cent GDP growth forecast for 2008,' he tells BT.
MTI - which yesterday also raised its 2008 inflation forecast for Singapore to 4.5-5.5 per cent - would be cheered by such confidence.
'Growth will be lower and inflation higher, not a great combination,' Mr Menon said. But the slowdown - after four years of above-trend growth - towards the economy's underlying potential will help ease supply-side constraints and relieve cost pressures, he added.
Beyond 2008, the economy is well-positioned for any pick-up, he said. 'Notwithstanding the weakened macroeconomic picture, the economy remains in fundamentally good shape structurally.'
Rising costs - and Singapore's ever-strong fiscal balances - set the stage for the Budget today. Rebates and other goodies for lower-income households, as well as a cut in the personal income tax rate, are widely anticipated.
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