Analysts are confident Singapore will achieve about five per cent Gross Domestic Product (GDP) growth for the whole of next year.
Economists said that is a very strong number, coming after a 15 per cent expansion estimated for 2010. But they warn of possible risks such as inflation, which might be a drag on the city-state’s economy.
Economists have said that 2010’s growth was uncharacteristic and unsustainable.
Leong Wai Ho, Senior Regional Economist with Barclays Capital, said: “The vital signs for the economy are still healthy. I would see it as a moderation, back to a more sustainable growth path.”
Electronics, analysts said, is set to lead the growth path for Singapore, contributing about 25 per cent in 2011.
Mr Leong, said: “Next year, we’ll see the release of new technologies by Intel. As you know Intel is releasing its Sandy Bridge micro processors and the promise of a one-time quantum leap in terms of PC performance. And that quantum leap we think will propel world electronics demand, replacement demand for PCs, for IT products to gradually improve through the course of 2011.
“It matters a lot for Asia particularly countries like Taiwan, Korea and also electronics producers like Singapore which manufactures some of the components that go into PCs, for example, integrated circuits.”
However, a strong Singapore currency, a tight labour market and rising costs could affect growth.
Kelvin Tay, Singapore Chief Investment Strategist with Wealth Management Research at UBS AG, said: “We expect inflation to be in the region of between three to four per cent. Of course a stronger currency will mean that some aspects of the economy will be impacted more than others.
“For instance, I think the retail sector will be impacted negatively. And the reason for that is that with a stronger Singapore dollar, I think a lot of Singaporeans will take the shopping overseas. Also you’re going to get tourists spending less in Singapore.
“The risk of inflation is coming in from two sources. One, quite rightly as you pointed out is China inflating itself, two, you’re still seeing a lot of capital inflows coming into this region. If you have a lot of inflows coming in, then naturally, that in turn might potentially spike asset bubble somewhere down the line.”
Some analysts however are confident that the volatile pharmaceutical cluster will continue to make contributions to the economy, while new production plants and shopping malls are expected to produce benefits which are set to roll over into 2011. The opening of the two integrated resorts like Marina Bay Sands have also contributed significantly to Singapore’s economy in 2010.
Going into 2011, analysts expect the IRs to continue to help boost the economy as it attracts more visitors, especially for meetings and conventions, leading to increased spending. Some experts said that another sector to watch for is the financial services industry which is expected to do well in 2011.
The sector contributes about 15 per cent to Singapore’s economy now and analysts expect the financial services industry to grow over 20 per cent within three years.
The government has said it expects Singapore’s economic growth in 2011 to be between four and six per cent.
Source : Channel NewsAsia – 21 Dec 2010