Singapore’s economy may be supported by a “strong” Asia as growth cools in 2011 from a record pace last year, according to Prime Minister Lee Hsien Loong.
Gross domestic product rose 14.7 percent in 2010, Lee, 58, said in his New Year message released in Singapore yesterday. That compares with the government’s November forecast of a 15 percent expansion. The trade ministry predicts the economy will expand 4 percent to 6 percent this year, an estimate reiterated by Lee.
“In Asia, growth momentum is strong,” Lee said. China and India are forging ahead, and countries in Southeast Asia are growing steadily. Hopefully Asia will continue to do well despite the weakness in developed countries, and create a favorable regional environment for Singapore.”
Asia led a global recovery last year as growth in developed markets was restrained by Europe’s sovereign credit woes and U.S. unemployment that remains above 9 percent. Singapore’s rebound has fueled inflation, prompting the central bank to allow faster currency gains and leading the government to implement measures to cool the property market.
“Inflation risks for Singapore appear to be tilted toward the upside,” Alvin Liew, a Singapore-based economist at Standard Chartered Plc, said before Lee’s message. After getting a boost from manufacturing last year, Singapore’s tourism and financial services industries will increasingly drive growth in 2011, spurred by “rising regional domestic demand from China and Southeast Asia,” he said.
The Monetary Authority of Singapore said in October it will steepen and widen the currency’s trading band while continuing to seek a “modest and gradual appreciation,” after undertaking a one-time revaluation in April. The central bank, which uses the exchange rate rather than a benchmark interest rate as its main tool to manage inflation, guides the Singapore dollar against a basket of currencies within an undisclosed band.
The Singapore dollar climbed more than 9 percent against the U.S. currency last year, marking its biggest one-year gain since 1994 and the fourth-best performance in Asia excluding Japan. The currency, which rose 0.6 percent to S$1.2823 versus the U.S. dollar yesterday, may strengthen to S$1.24 at the end of 2011, according to a central bank survey of economists published last month.
Inflation will average between 2 percent and 3 percent this year, the central bank predicts. Consumer prices rose 3.8 percent in November, the biggest increase in 22 months.
Singapore’s estimated expansion for 2010 would make the city of 5 million people the fastest-growing economy in the world after Qatar’s, according to International Monetary Fund estimates.
The economy grew 12.5 percent in the fourth quarter from a year earlier, Lee said. That compares with the 13.2 percent median estimate of 12 economists surveyed by Bloomberg News.
GDP probably increased about 6.5 percent last quarter from the previous three months, based on the year-on-year number given by Lee, said Song Seng Wun, an economist at CIMB Research Pte in Singapore. Liew at Standard Chartered estimates growth of 6.3 percent. That compares with the median forecast for an annualized 9.4 percent expansion in a Bloomberg survey of eight economists.
The economy contracted 18.7 percent from July to September. The trade ministry will release the fourth-quarter economic report at 8 a.m. on Jan. 3.
The island’s biggest companies are boosting operations or expanding overseas as the global economy recovers from a slump in 2009. DBS Group Holdings Ltd., Southeast Asia’s biggest bank, said last month it will take over Royal Bank of Scotland Group Plc.’s retail and commercial banking businesses in China.
Neptune Orient Lines Ltd., owner of Asia’s second-largest container line and controlled by Singapore state-investment fund Temasek Holdings Pte, in July signed a $1.2 billion contract for as many as 12 vessels with Daewoo Shipbuilding & Marine Engineering Co.
Singapore, the second-busiest container port globally, is located at the southern end of the 600-mile (966-kilometer) Malacca Strait, the world’s busiest sea lane. The island has remained vulnerable to fluctuations in overseas demand for manufactured goods even after the government boosted financial services and tourism.
Lure of Casinos
The country’s first casinos opened last year as part of so- called integrated resorts run by Genting Singapore Plc and Las Vegas Sands Corp., luring tourists to their gambling centers, restaurants, malls and a Universal Studios theme park.
“The tourism-related sectors continued to do well as Singapore continued to hit record tourist arrivals month after month so far in 2010, with a significant role played by the integrated resorts,” said Liew of Standard Chartered. The casino-resorts “may have added 1 percentage point to headline GDP growth in 2010, excluding the potential spillover impact to other tourism-related industries such as hotels, food and beverage and even the real estate market.”
The city state added 82,000 jobs in the nine months through September, pushing the unemployment rate to 2.1 percent, the lowest level in 2 1/2 years. Average wages before adjusting for inflation rose 5.4 percent in the third quarter from a year earlier.
“Singapore is not without challenges and problems,” Lee said. “We have to manage the inflow of foreign workers and immigrants, keep home ownership affordable to all, and help low- income Singaporeans cope with the cost of living.”
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