ASEAN KEY DESTINATIONS
Singapore: Years of slow growth to follow recession
Singapore's economy, already in recession, may shrink in 2009 and face slow growth for years to come, the country's prime minister said, as the export-dependent city-state is hit by the fallout from the world economic crisis, reported Reuters.
Lee Hsien Loong, at a lunch hosted by Singapore's Foreign Correspondents Association, said it was not government policy to weaken its currency -- a move that could help exporters but hurt the country's standing as place for investment.
"Singapore must be prepared for several years of slow growth," he said. "Even the most pessismistic bears did not anticipate the consequences of the bubbles," Lee added, referring to U.S. subprime housing woes and global trade imbalances.
The central bank, which sets monetary policy by managing the Singapore dollar against a secret basket of currencies, in October switched from allowing a gradual rise in the currency to a neutral stance of zero appreciation.
Some commentators expect the central bank to ease policy further by letting the currency weaken ahead of its next scheduled review in April.
Lee, the son of Singapore's founding father and former Prime Minister Lee Kuan Yew, is facing his biggest test since taking office four years ago, with the country's top trading partners the United States and Europe in recession and growth in Asian neighbours slowing.
Lee said policies to boost the economy would take effect immediately after being announced in an expansionary January budget. The government would partly rely on construction to help growth with project costs coming down, he said.
"It makes sense for us to take advantage of that," Lee said. "The budget emphasis will be on jobs." He expects unemployment to rise, particularly in manufacturing, which accounts for about a quarter of the economy.
Last month, the government pledged to spend S$2.3 billion ($1.5 billion) to help firms get credit and said it would run a larger budget deficit to support an economy that it said could shrink 1 percent in 2009 and at best would expand 2 percent.
The government is trying to diversify away from manufacturing into service industries such as tourism and finance.
Singapore’s banks have not suffered huge writedowns on risky debts unlike peers in the United States and Europe, though top bank DBS Group said last month it would cut 900 jobs after suffering a 38 percent drop in quarterly profit.
Lee said Singapore may face political pressure from the European Union and the United States over its role as a financial centre for rich foreigners, following a landmark deal by offshore haven Liechtenstein with the United States to drop bank secrecy in cases of tax evasion.
"I expect Singapore to come under pressure too," he said in response to a question on whether pressure on countries like Liechtenstein and Switzerland will help private banks based in Singapore.
The government has previously denied suggestions that the country is a tax haven. It has strict bank secrecy laws and has been promoting itself as a rival financial centre to Hong Kong to attract banks such as UBS , Credit Suisse and Citigroup to manage money for rich clients.