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Charter changes to cope with recession

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October 22, 2008

Singapore: Charter changes to cope with recession
Singapore's parliament voted on Tuesday to amend the city-state's constitution to allow the government more access to the country's reserves to cope with a faltering economy, Reuters reported, quoting local media.

The changes to the constitution will allow the government to draw on more returns from investing the reserves, so that its income can keep pace with rising expenditure, reported the pro-government newspaper The Straits Times on its website.

Official flash estimates showed this month that Singapore's economy contracted at an annualised rate of 6.3 percent in the third quarter after seasonal adjustments, pushing the export dependent economy into recession for the first time since 2002.

"We have the resources to do this and we have the resilience to see ourselves through," Singapore's Prime Minister Lee Hsien Loong was quoted by The Straits Times as telling parliament.

Lee also said that the government was preparing measures to help businesses, families and workers cope with the downturn. State broadcaster ChannelNewsAsia reported that the extra funds would be spent on research and development projects and medical care for the aged.

CIMB economist Song Seng Wun said the move gave the government more options to deal with a gloomy economic outlook.

"It will give them the flexibility to use the funds for a rainy day and I think a rainy day may be upon us," Song said.

The global financial crisis has led Singapore to announce last week it will guarantee all local and foreign currency deposits in banks, finance companies and investment banks operating in the city-state with immediate effect, backed by S$150 billion ($101.5 billion) government reserves.

Economies across Asia are set to slow this year as the financial crisis threatens to push developed nations into recession, depressing demand for Asian exports.

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