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Stronger Singdollar, slower growth ahead: IMF

Monday, July 26, 2010 By

The Singapore dollar is undervalued and likely to rise. For inflation is likely to accelerate and “further calibration” of the monetary policy may be needed, says the International Monetary Fund in its just released report on Singapore. The report, released after IMF executive board consultations with Singapore, is interesting in what it has to say about property prices.

Singapore growth forecasts by IMF

But first look at the growth projections. The IMF expects the Singapore economy to grow 9.9 per cent this year, far less than the Singapore government's own estimate of 13 to 15 per cent growth. Here is Singapore's medium-term outlook from the IMF report. The figures from this year onwards are IMF forecasts.

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Singapore economist compares Singapore with China

Tuesday, July 20, 2010 By

State-owned enterprises or government-linked companies (GLCs) are taking a bigger and bigger share of the economic pie in both Singapore and China. And, in both countries, labour gets the lowest share of the national income in the form of wages.

So says Singapore-born Linda YC Lim, a professor of business strategy at the University of Michigan, in a paper which asks: Why do East Asians save so much?

One reason is high property prices. Then again, "Some economies—Singapore, Malaysia, Hong Kong—have forced-saving schemes or national “provident funds” with high rates of mandatory contributions out of earned income."

Nevertheless, there is a growing income gap between the rich and the poor. It is the high income earners, GLCs and multinationals that are thriving in "corporatist" Singapore, she adds.

Unlike in other East Asian countries, domestic consumption in Singapore fell from 46.3 per cent of the gross domestic product (GDP) in 1990 to 38.6 per cent in 2007 and in China from 50.6 per cent  to 36.4 per cent, says Lim. Private consumption and wages are probably held in check in Singapore by the presence of a large and growing foreign workforce which, like the multinationals, wants to send money home, she adds.

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Singapore paper slow to report Singapore news

Tuesday, March 31, 2009 By

Singapore’s leading newspaper is slow to pick up even Singapore news! The Straits Times has published online news agency reports about how Asia may recover next year, India’s growth to slow 5%  and China to grow at 7% in 2009, based on the Asian Development Bank’s economic forecasts published today.

But it has not yet reported that the Singapore economy is expected to shrink more than Hong Kong, South Korea, Taiwan or any other Asian economy this year. That’s what the Asian Development Bank report shows. Has anyone at the Straits Times read the report? It’s available on the Asian Development Bank website.

The report says the high level of home ownership and the attendant financial liabilities limit Singaporeans’ spending power and that is one reason why Singapore hasn’t been able to increase domestic consumption to mitigate the recession.

Here are the bank’s GDP growth forecasts for 2009 and 2010 (percentage change from previous year):

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Home loans hinder Singapore recovery

Tuesday, March 31, 2009 By

Singapore’s economy is likely to shrink by five percent or more this year, more than any other economy in the region, according to the Asian Development Bank.

No other Asian economy – not even Hong Kong, South Korea or Taiwan — is expected to shrink so sharply. Most, in fact, are expected to continue to grow. (See chart at the end of this post. The report excludes Japan.)

And the reason Singapore is expected to fare so badly?

It’s not just because Singapore has gone into “high-value industries such as biomedical manufacturing which depend on demand from industrial countries at the heart of the crisis”.

Singapore’s problems are exacerbated by the property market, according to the bank, which released the Asian Development Outlook 2009 report today.

The high level of home ownership – more than 90 percent in Singapore – and the attendant financial liabilities have “suppressed disposable incomes and hence consumption,” says the bank.

Hong Kong consumes more than Singapore, it adds. About Hong Kong, it says:

GDP is forecast to fall by 2 percent in 2009. In 2010, growth is expected to resume at about 3 percent.

The bank says about Singapore:

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Singapore a prisoner of its own success

Friday, February 20, 2009 By

I feel sorry for Singapore’s Prime Minister Lee Hsien Loong. It may seem strange, an ordinary man feeling sympathy for arguably the highest paid leader in the world.

Human rights groups critical of Singapore may think I am naive.

But there must be something about Singapore that attracts investors and foreigners and has transformed this city state into one of the richest countries in Asia. The boom has gone out of the economy now, hit by the global downturn.

Yet, if the economy is sinking, it is doing so sedately. Unemployment is still low at 2.6 percent. And the government is doing what it can to prevent jobs and business from slipping away.

Nobody can accuse the prime minister of downplaying the crisis. He openly acknowledged Singapore cannot survive on its own when he said: “Walling ourselves in does not mean that we would be safe; it just means we will starve.” 

Everyone knows the Singapore economy depends on export markets and foreign investments. But for a government as sensitive to criticism as Singapore’s, this was indeed eating humble pie.

Some say the government is not doing enough to stimulate the economy. Sceptics doubt that the government can save jobs by footing part of the employers’ wage bills under the Jobs Credit scheme. People would have benefited more from government handouts, it is said.

That would have been the Keynesian solution, according to a recent article in the New Republic. It says:

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