Showing posts with label Economy. Show all posts
Showing posts with label Economy. Show all posts

Monday, January 19

Govt may tap reserves

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Jan 19, 2009
Govt may tap reserves
Move may be necessary to fund aggressive relief measures in downturn
By Jeremy Au Yong, Political Correspondent

ONE of the country's sacred cows could be slaughtered during the Budget this Thursday as the Government mulls over a move to dip into Singapore's rainy-day savings: the national reserves.

The leaders are now considering the unprecedented step of drawing from the reserves to fund the aggressive pain-relief measures needed in this downturn, Senior Minister Goh Chok Tong disclosed yesterday.

'The issue which the Prime Minister and the Minister of Finance are now thinking over, is whether we should go to the President and ask him for approval to use the reserves for extraordinary measures,' he told reporters after giving out $100 hongbao and goodies to the poor in his Marine Parade constituency.

But he also cautioned: 'It's a difficult decision because once you do that, you may open the reserves for future demands, which may not justify the use of reserves.'

On Friday, Prime Minister Lee Hsien Loong had said the Budget will run into a deficit this year and if necessary the Government will dip into the reserves.

He told reporters: 'The Government's job is not to do everything which is asked for but to see which are the items which will be most effective and then how do I raise the money to fund all the things which I need to do, either from the Budget revenues this year or from the reserves.'

Last year, the Government had modified the rules to allow it to spend a larger chunk of investment returns from the reserves.

In 1999, in the aftermath of the Asian financial crisis, the Government had shied away from dipping into reserves, even in the face of a $5 billion Budget deficit. Mr Goh was the prime minister then.

Yesterday, however, he pointed out that a 'muscular response' in the upcoming Budget is needed as these are exceptional times - and the key issue is to save jobs.

'There must be exceptional measures for exceptional times,' he said.

He gave a sampling of the dire economic news coming in, noting the sharp dive in export figures last month. Singapore's exports plunged 21 per cent in December, the biggest fall in almost seven years. At PSA, 30 per cent of the cranes are sitting idle.

'The weather is so bad, and we've always said the reserves are for a rainy day. If this is not a rainy day, I don't know what is a rainy day,' he said.

Asked how much money the Government may take out of the reserves, he said the amount did not matter. What was important was that the measures justified the use of reserves.

The Government has a hefty war chest to turn to. The reserves include assets managed by the Government of Singapore Investment Corporation (GIC), as well as those owned by the Monetary Authority of Singapore (MAS) and Temasek Holdings.

As of September last year (08), the MAS' foreign exchange reserves were valued at about $240 billion. GIC's portfolio is valued at well over US$100 billion (S$148 billion). Temasek Holdings' portfolio is worth $185 billion but its assets are not covered by the constitutional amendment on net investment returns.

MPs contacted gave mixed responses to unlocking the reserves.

Dr Muhammad Faishal Ibrahim (Marine Parade GRC) and Mr Liang Eng Hwa (Holland-Bukit Timah GRC) said they were in favour if the money was well spent. Mr Liang said using the money to build up the economy and workforce is akin to investing in a different asset.

Mrs Josephine Teo (Bishan-Toa Payoh GRC) however said she would rather wait first to see how bad the crisis gets.

'The conservative part of me says we really do not know how long this crisis is going to last. Will we risk running out of ammunition when we most need it?'

Financial analysts contacted backed any move to open up the war chest. That, they said, would spur a more aggressive Budget.

Said Dr Chua Hak Bin, Citigroup's head of Singapore equity research: 'We were concerned that the Budget was not going to be aggressive enough because of the constraint of having a balanced Budget.'

Nanyang Technological University economist Tan Khee Giap said that factoring in expenditure at the beginning was better than introducing off-Budget measures later. 'We should budget for the worst and hope for the best,' he said.
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Saturday, December 27

Output in recession-hit Singapore down 7.5 pct in Nov

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SINGAPORE (AFP) — Singapore's manufacturing output fell 7.5 percent in November, according to the latest data, as exports from the recession-hit economy suffer during a global slowdown.

The 7.5-percent decline, compared with the same month last year, was less than an average 15.0 percent drop forecast in a Dow Jones Newswires poll of economists.

Gains in pharmaceutical production could not outweigh falls in most other categories, the preliminary data from Singapore's Economic Development Board (EDB) showed.

But increased biomedical manufacturing, which includes pharmaceuticals, pushed output up by 6.2 percent on a seasonally adjusted month-on-month basis in November from October, EDB said.

Singapore's manufacturing sector accounts for nearly a quarter of economic output. Virtually all of the production heads for foreign markets, an indicator of Singapore's dependence on the health of the global economy, analysts say.

With key markets the European Union and the United States in recession, Singapore's exports have been hurt and the city-state in October became the first Asian economy to enter recession.

The numbers were "a little better than people expected" but most gains came from the notoriously volatile pharmaceutical sector, said David Cohen, director of Asian forecasting at global research house Action Economics.

Pharmaceutical output grew 17.5 percent in November, the EDB said. Medical technology, the other component of biomedical manufacturing, dropped by 15.4 percent but overall biomedical output rose 14.9 percent, EDB said.

Consumer electronics and information-communications output fell by 58.2 percent while semiconductors dropped 17.6 percent, helping to drag total output in the electronics sector down by 19.4 percent last month, it said.

The chemical sector fell by 20.1 percent in November, on lower petrochemical and petroleum output, while precision engineering output fell by 19.1 percent and general manufacturing -- which includes printing -- declined by 1.7 percent, EDB said.

An increase in ship repairs and aerospace output boosted the transport engineering sector by 5.2 percent in November, the data showed.

Cohen said the economy is likely to grow less than the government forecast of 2.5 percent this year -- "maybe closer to two percent".

Next year, he added, growth should come in at the lower end of the government's 2009 projection, which ranges from a contraction of 1.0 percent to growth of 2.0 percent.

"I think the global demand is still slowing down, which is reflected in the electronics sector," he said, adding that advance fourth-quarter GDP figures due on January 2 are expected to provide further evidence that Singapore is in recession.

"The hope is it will bottom out by the middle of next year, which still seems reasonable," he said, adding that some downside risk remains.
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Wednesday, December 10

Economists cut 2008 forecast to just 2.2%

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Private sector economists drastically cut 2008's growth forecast
By Rachel Kelly, Channel NewsAsia

SINGAPORE: The Singapore economy is expected to grow just 2.2 per cent this year, according to a central bank survey of private sector economists. This is nearly half the 4.2 per cent clip they predicted just three months ago.

The economists are also predicting a 1 per cent contraction for the economy – the first in eight years.

The turmoil in financial markets in October and November this year has triggered spillover effects on the global economy.

In the last survey in September by the Monetary Authority of Singapore (MAS), economists had thought the economy would grow around 4.2 per cent.

But with the collapse of US investment bank Lehman Brothers and financial problems at major Wall Street names, the outlook has become gloomier.

Market-watchers now expect the Singapore government to step in to buffer the slowdown.

Vishnu Varathan, regional economist, Forecast, said: "A very close watch factor would be how much of fiscal stimulus the government is aiming for the Singapore economy, and what form it will come in ... and what way it will be done."

Just a month ago, the government reduced its growth forecast for the economy to 2.5 per cent this year, down from an earlier estimate of 3 per cent. For next year, the survey showed that non-oil domestic exports will shrink 9 per cent.

Although economists said the construction sector is one sector due to see growth next year, they noted that this would not be enough to offset heavy falls in sectors such as manufacturing.

The key manufacturing sector is expected to contract 4.5 per cent. But the good news is that inflation will ease to around 1.7 per cent in 2009, compared with the expected 6.5 per cent this year.

Irvin Seah, economist, DBS Bank, said: "I think the fact that inflation is showing signs of easing is a very good for consumers, especially for the lower income group. High food prices would have squeezed their pockets."

On the labour front, the unemployment rate is expected to climb to 3.4 per cent next year.
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Friday, November 21

S'pore cuts GDP forecast

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Nov 21, 2008
S'pore cuts GDP forecast
Economy could shrink in 2009.

SINGAPORE on Friday further downgraded its growth forecast for this year and said the economy could contract in 2009, after weaker than expected third-quarter GDP figures.

The economy shrank at a worse-than-expected rate of 6.8 per cent on an annualised and seasonally adjusted basis in the third quarter, final government data showed on Friday, confirming the export-dependent country's first recession since 2002.

The government forecast full year 2008 growth at around 2.5 per cent, from a previous estimate of 3 per cent.

Economists had expected the data to confirm a previous government flash estimate of a 6.3 per cent contraction on an annualised seasonally adjusted basis. The median of forecasts by eight economists was for full-year GDP growth of 2.3 per cent.

Singapore was the first country in Asia to fall into a recession, usually defined as two consecutive quarters of economic contraction, with Japan and Hong Kong having followed.

A Ministry of Trade and Industry statement on Friday said the economy will expand 2.5 per cent in 2008, lower than an October forecast for 3 per cent growth and less than a third of 2007's pace. The economy, already in recession, may shrink by as much as 1 per cent next year, the first time since 2001.

Singapore will announce its next budget in January, a month earlier than planned, as Prime Minister Lee Hsien Loong warned the economy may experience several years of slow growth.

'There is a degree of urgency needed to implement expansionary policies to address the weakening economy,' Mr Joseph Tan, the chief economist for Asia at Credit Suisse Private Banking in Singapore told Bloomberg news.

'The government knows it can't do much about external demand so the focus will be to pump-prime the economy through domestic sources.'

Gross domestic product contracted an annualised 6.8 per cent in the third quarter from the previous three months, after shrinking a revised 5.3 per cent between April and June, the trade ministry said in a statement today. That was more than the median forecast of a 6.3 per cent decline in a Bloomberg News survey of 10 economists, which was the same as the government's estimate in October.

Overseas shipments in the first 10 months of 2008 were about 6 per cent lower compared to the same period last year, already worse than the government's forecast for a full-year decline of as much as 4 per cent.

The manufacturing industry, which accounts for a quarter of the economy, contracted a revised 11.4 per cent last quarter from a year earlier, compared with a revised 5.2 per cent drop in the previous three months, Friday's data showed.

The production slump has led to widening losses at companies including Chartered Semiconductor Manufacturing Ltd, the world's third-largest made-to-order chipmaker, and prompted some to cut jobs. Three-quarters of the 2,000 workers retrenched in Singapore last quarter were from the manufacturing industry.

Singapore's services industry also slowed as the global credit crunch hurt financial companies, tourist arrivals dropped and consumers cut back on spending. Services climbed 5.3 per cent in the third quarter from a year earlier, slowing from a revised 7.1 per cent pace in the previous period.

The construction industry grew 12.8 per cent, easing from a rate of 19.8 per cent in the previous quarter. The building industry is facing labour and equipment-shortage constraints, and developers are delaying the introduction of new properties as prices fall. -- REUTERS, AFP


This news confirmed what had been expected all along. In fact, it has been priced into the market already. The drop was mainly attributed to the manufacturing sector with regards to the biomedical centre. Singapore is highly dependent on exports and with the US economy in doldrums, it is expected that manufacturing activities will be taking a hit.

I noticed that it is quite strange that majority of those who were retrenched in the last quarter were from manufacturing and not from financial services. After all, most of the news about retrenchment in the press came from banks and other financial firms.
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