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Thursday, September 9, 2010 By

Public trust of politicians highest in Singapore

Singapore is first in the world for quality of higher education, first in math and science and Singapore's politicians enjoy the highest public trust in the world.

That's according to the Global Competitiveness Report 2010-2011, released by the World Economic Forum today.

Singapore remains the world's third most competitive economy, overtaken by Sweden, which has jumped to second place from fourth. Sweden also has the third most trusted politicians in the world, after Singapore and Qatar. (See the list of countries with the most trusted politicians at the end of this post.)

Switzerland remains the world's most competitive economy for the second year running, while America, the former No 1 which dropped to second spot last year, is now down to fourth place. Swiss politicians are the 12th most trusted in the world.

Singapore finishes in the top 20 in almost every category except judicial independence, in which it is ranked 21st, and intensity of local competition, in which it is ranked 28th.

The report is based on national and international data as well as an executive opinion survey. In  Singapore, the business executives surveyed were selected with the help of the Economic Development Board. See How the Global Competitiveness Report is prepared.

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Wednesday, April 14, 2010 By

Stronger Singapore dollar to fight inflation

The Singapore dollar is edging towards a five-year high with the Monetary Authority of Singapore (MAS) revaluing it today to fight inflation.

Singapore's central bank reversed its "zero per cent appreciation" policy introduced one and a half years ago to keep the currency in check and help exporters during the recession.

The Monetary Authority of Singapore (MAS) announced today it will "re-centre the exchange rate policy band at the prevailing level" — the Singapore dollar is currently trading around S$1.38 against the US dollar — and allow a "modest and gradual appreciation".

Inflation is expected to go up to 2.5 to 3.5 per cent this year on the back of faster than expected economic growth.

The MAS decided to let the Singapore dollar rise as the economy grew more than expected, by 13.1 per cent in the first quarter compared to a year ago. The economy is now expected to grow by 7 to 9 per cent this year, up from 4.5 to 6.5 per cent predicted in February.

The Singapore dollar has already risen to pre-crisis levels. It is trading close to levels last seen between April and July 2008, when it rose to a five-year high, as you can see from the chart (below) going back to April 2005.

Still, the Singapore dollar is more than 20 per cent undervalued against the US dollar, the Financial Times reported yesterday, quoting the Asian Development Bank.

Singapore_dollar_yahoo_fina

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Wednesday, April 14, 2010 By

Singapore GDP up 13.1%: Now 7-9% growth forecast

A buoyant first quarter lifted Singapore's economic prospects higher than forecast only two months ago.

The Singapore economy is now expected to grow by 7 to 9 per cent this year. The Ministry of Trade and Industry (MTI), which in February predicted 4.5 to 6.5 per cent growth this year, raised its forecast today following what it called "exceptionally strong growth in the first quarter of 2010" .

Advance estimates indicate 13.1 per cent growth in the first quarter compared to a year ago.

Manufacturing output more than doubled since the last quarter while the construction sector grew by 11.3 per cent and services by 8.4 per cent from a year ago.

The ministry now forecasts 2.5 to 3.5 per cent inflation this year, up from 2 to 3 per cent predicted earlier.

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Thursday, October 23, 2008 By

Singapore inflation up

 Singapore's annual inflation accelerated in September on higher food and housing costs but stayed below a 26-year high, with price pressures likely to ease in coming months as the financial crisis reduces demand, reports Reuters.

The consumer price index rose 6.7 percent in September from a year ago, and economists said it showed price pressures will take time to abate, reducing chances of the central bank further easing monetary policy before its next scheduled announcement in April.

The index rose 6.4 percent in August.

From the previous month, the consumer price index rose 0.1 percent
after seasonal adjustments, the Department of Statistics said today, compared with a forecast for a 0.1 percent fall.

The trade-dependent economy fell into its first recession in six years
in the third quarter after exports and manufacturing output slumped.

Singapore's inflation held at a 26-year peak of 7.5 percent in the
second quarter but has since eased, partly as the effects of a
two-percentage-point rise in sales tax last year faded from annual
calculations.

The central bank expects 2008 inflation to be within 6-7 percent this year, and easing to between 2-3 percent in 2009.

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Wednesday, October 22, 2008 By

The home loans that brought the economy down

We have heard so much about the subprime crisis, but here's the simplest and easiest-to-understand piece I have come across. And it is relevant to Singapore, where — as in the US — the property market plays a major role in the economy.

Washington is pumping money into banks to avoid a recession, but that is wrong, says Charles R Morris, a former investment banker and author of Trillion Dollar Meltdown, reports Bloomberg.

He urges the U.S. to instead engineer a recession, as former Federal Reserve Chairman Paul Volcker did when he slew runaway 1970s inflation by raising interest rates as high as 20 percent. 

Americans can't go on piling up debt by buying things on easy credit, he says, so a recession is needed.(He doesn't mention that Volcker's recession also led to the highest US unemployment levels since the Great Depression, but read on.)

Solvency, not liquidity

Morris says the current US bank bailout perpetuates the misconception that "we have a liquidity problem, not a solvency problem".

To explain the difference, Morris cites two precedents: The rise of U.S. grain futures in the 19th century and the tulip bulb mania that gripped the Netherlands in the 17th century.

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Friday, August 15, 2008 By

Singapore dollar undervalued, says IMF, urges more public spending

To fight inflation, Singapore should allow the Singapore dollar to strengthen and increase public spending to help the people, says the International Monetary Fund, which expects Singapore's growth rate to fall to 4.5 percent in 2008-2009. The IMF expects inflation in Singapore "would near 7 percent in 2008 –  a 27-year high — but taper off next year." However, it adds: "The uncertain external environment may weigh on growth, and inflation could become entrenched."

The Singapore dollar is "5 to 15 percent below its equilibrium level", says the IMF, which adds Singapore has ample reserves to increase public spending. Foreign capital is "surging" into Singapore because economic uncertainties have made investment in the West less attractive, it says. The report can be downloaded from the IMF website as a PDF file.

Singapore's economic problems are not due to the sub-prime crisis, says the IMF, which points out the Singapore banks have only limited exposure to the sub-prime market. "Based on market estimates, total losses at three Singaporean banks may amount to US$0.3 billion (about 3 percent of aggregate bank capital)," it says, "compared to US$144 billion in the United States and US$123 billion in Europe (about 15 and 9 percent of aggregate bank capital, respectively)."

About Singapore's official reserves and the balance of payments, the IMF says: "After reaching about 24 percent of GDP in 2007, the current account surplus dropped to around 14 percent of seasonally adjusted GDP in the first quarter of this year as the trade balance shrunk. With lingering concerns about asset quality in major advanced economies, Singapore has continued to experience a surge in capital inflows and official reserves have kept on rising…

"Since end-2006, official reserves and the forward book have increased by a combined US$73 billion to US$268 billion (or about 140 percent of GDP)."

However, Singapore is heavily dependent on the US economy. The IMF notes:

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Thursday, July 10, 2008 By

Singapore slowdown

Will Singapore plunge into a recession sooner than America? It is getting ominously close to the danger point. It now turns out Singapore leaders fretting aloud for all these months about the dangers of a US recession have been standing on shaky ground, with the economy slipping and sliding downhill. Now at last it’s wakeup time.

The Singapore economy slowed to a five-year low, growing just 1.9 percent in the last quarter, between April and June, the government announced today. That’s a sharp downturn from the 6.9 percent growth between January and March. The economy did not just slow down, it hit the emergency brakes.

“The slowdown chiefly reflected a sharp contraction in biomedical manufacturing,” the Ministry of Trade and Industry said.

Talk about hindsight — and a rude awakening.

The ground reality turned out to be worse than the economists feared.

Economists polled by Dow Jones Newswires had forecast 2.3 percent growth.

Singapore seems to be caught in a perfect storm from which not even its government’s fabled economic management can bail it out.

Inflation, running at a 25-year high, is blamed on surging world food, fuel and commodities prices.

Finance Minister Tharman Shanmugaratnam warned against pay rises yesterday, saying that could mean more inflation and make Singapore less competitive in the world.

And the strong Singapore dollar, the one weapon the government has been using to fight inflation, cannot go on rising against other currencies indefinitely, he added.

So what happens next depends on the global economy. 

The finance minister still expects 4 to 6 percent growth this year. How is that possible? For he himself said (this is from the BBC):

“Our export-oriented sectors, especially manufacturing, are being hit by deteriorating economic conditions in the US and Europe…

“This is likely to continue in the coming months and the weakness in manufacturing will act as a drag on overall GDP growth.”

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Friday, February 15, 2008 By

Price hike follows tax hike

Singapore is facing its steepest price rises in 27 years — partly due to government policy. The cost of living has gone up partly because of the sales tax hike last year, Finance Minister Tharman Shanmugaratnam said today while presenting this year’s budget.

But the main reason for inflation is high prices of food and oil due to rising global demand, he said, adding that "inflation is higher today than we have been used to for many years".

The consumer price index, which averaged 2 percent last year, hit 4.4 percent in December and is expected to hit 4.5 percent to 5.5 percent this year — Singapore’s highest inflation rate since 1981, according to Channel NewsAsia. Prices rose after the Goods and Services Tax (GST) was raised from 5 percent to 7 percent in July last year.

Shanmugratnam said in his budget speech:

The relatively high ‘headline’ consumer price index (CPI) numbers that we are now seeing, like in December, are partly due to the GST increase in July last year. The CPI inflation figure continues to show the impact of the GST change, because it is comparing prices this month with prices 12 months ago, that is, before the GST increase in July 2007. But if we compare prices today with prices say in September last year, there has been little further increase due to the GST change. The GST change has caused only a one-off increase in prices, and not continuing price increases.

He stressed:

Singaporeans have not been materially affected by the GST increase, because the government has provided the majority of citizens with substantial offsets, which more than make up for the increased spending on GST by most families. Lower-income families are in fact receiving offsets which are several times larger than their higher GST payments.

Rising property prices have also contributed to inflation, he added.

(The) rising values of homes… will contribute significantly to inflation this year. However, here too, most Singaporeans are not materially affected, as 95 percent of citizens own their own homes and do not pay rentals.

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