Trading Down

Things Haven’t Got Off to a great start for Singapore’s economy in 2001 and that doesn’t bode well for the rest of the year. The signs of a slowdown are most apparent on the trade front. The country’s non oil exports fell 4.9 % in December from a year earlier. With electronics products making up two-thirds of total exports, Singapore is vulnerable to a fall off in global electronics demand. The state-run Trade Development Board forecast that the country’s total trade will grow only at a pace of 7% to 9% in 2001, down from 22.9% last year. The highest jump since 1988

The sharp fall in December’s exports has sent analysis rushing to cut their 2001 economic growth forecasts for Singapore. Projections from private sector economist typically hover around the 5% level, but some have fallen to as low as 4.1%. And while Ministry of Trade and Industry maintains that GDP will expand 5%-7% this year, That’s a far cry from last year’s preliminary figure of 10.1% GDP growth.
The weak trade data increases the possibility that the Monetary Authority of Singapore will revert to a neutral monetary policy this year from its tightening stance, some analyst say. But in an interview with the Associated Press in January, Prime Minister Goh Chok Tong said the monetary policy would stand for now. We have never used a cheap currency to boost exports, He said.
On Positive note, Singapore’s economy remains one of the region’s strongest ones. That current-account surplus is expected to remain wide and will provide support to the Singapore dollar despite expected currency weakness else where in the region, according to a recent report by HSBC. The bank also notes that Singapore’s budget surplus, which approached 3% of GDP throughout the 1990s, means that is enjoys considerable fiscal flexibility in the event of a global downturn. And with non energy inflation running at just 0.6% in the year to date, Singapore also has room to maneuver on monetary policy.
The political environment, meanwhile, remain stable. Singapore is one of the few countries in Asia enjoying increasing foreign direct investment commitment.
(by. Thris Saywell, in www.feer.com Feb 01 2001, page 54)
Re-publish by. www.tradinginfoceo.blogspot.com , March 3, 2008