|
|
|
|
|
|
 |
 |
Singapore Economy Gains Ground |
|
| |
Positive forecast for Singapore's economy and labour market; uptrend in investment growth likely to continue in 2005.
CSFB predicts that labour market restructuring and rising property prices will come together to propel the Singapore economy towards at least a five per cent gross domestic product (GDP) growth over the next one to three years.
Forward-looking indicators for the labour market in the next 12 months imply a broad-based pickup in wage and employment conditions not seen since the early 1990s. Consumer spending over the next year or two is likely to be much more resilient to volatility in the global economy, relative to what was observed in the last seven years.
Strong economic rebound
With the rebound in economic activity in South-east Asia, demand for transport, communications, business, wholesale and retail trade services has risen in Singapore. These trends are expected to continue in 2005, with GDP growth in South-east Asia averaging above 4.5 per cent.
Macroeconomic indicators such as Revealed Comparative Advantage indices show that Singapore's global market share in the key electronics and electrical goods sectors - which accounts for five per cent of employment and 40 per cent of manufacturing output - is now rising.
In particular, consumer electronics is becoming an important driver of exports in Singapore, and business consultants Access Markets International Partners (US) predict a 12 per cent rise in information technology (IT) spending among small and medium enterprises to S$2.1 billion (US$1.3 billion) in 2005.
Influx of foreign investments
In a significant move, a growing number of manufacturing companies are relocating their China-based production facilities to Singapore, citing the Republic's intellectual property laws and lower logistics costs as key pull factors.
Additionally, Exxon Mobile (US), Shell (Netherlands) and Sumitomo (Japan) are looking to expand petrochemical facilities in Singapore in 2005 at a cost of approximately S$1.6 billion (US$1 billion). As such, the current uptrend in investment growth is likely to continue in 2005.
In the services sector, office property leases are being driven by an influx of IT services firms to Singapore, mainly in the e-solutions, design and research and development arenas. This is in line with the trend of outsourcing from industrialised countries to Asia, particularly Singapore, which is regarded as a top destination for outsourcing.
Focus on quality and productivity
Industry surveys indicate that cost adjustment is no longer the main concern among Singapore-based firms; instead, quality and productivity level improvements have become the key strategic thrusts. CSFB believes that economic policies in the next year or two are likely to focus on reflation to stimulate demand conditions.
Improved labour market conditions
The abatement of cost adjustment policies and improvements in corporate balance sheets are likely to support improved labour market conditions in 2005. The engineering, electronics, financial, logistics and property sectors are expected to realise the largest increases in wage growth.
Singapore firms are expected to demonstrate better returns on investment and returns on equity in 2005, largely due to the selling of non-core assets and lower margin businesses. Analysts believe these trends will continue as the manufacturing and services sectors become more competitive and obsolete capital goods are written off firms' balance sheets. These dynamics imply that the pace of retrenchment will decrease, and CSFB estimates that the unemployment rate will drop to three per cent in 2005 and 2.7 per cent in 2006, from 3.4 per cent in 2004.
This article is adapted from Singapore: End of Structural Malaise-New Beginnings which is written by Dr Sailesh Jha and Mr Tse Chern Chia, Credit Suisse First Boston (Switzerland)
|
| |
|
|
|
|
|
|
|
|
