The IMF is warning Singapore may be headed for slower growth next year, but its chief economist reckons this will only be temporary and says that it does not mean Singapore’s economy is on a downtrend.
In its latest World Economic Outlook, the IMF has raised Singapore’s 2006 growth forecast to 6.9%, from 5.5% previously, but it has also projected a slower growth of 4.5% next year (2007) due to the economic slowdown in the US, Singapore’s main trading partner.
“Any slowdown in the US would be a reasonably temporary one. We are talking about a year or two, rather than a span of five, 10 years. So in that sense, if the US economy slows in 2007, it’s not a given it will not start picking up in 2008, 2009,” said Raghuram Rajan, Chief Economist, International Monetary Fund. Singapore’s economy is expected to recover in tandem.
The city-state’s export-led economy grew 9.4% in the first half of this year, boosted by strong demand for consumer electronics, especially semiconductors.
“I think also one must know that some of the extremely high growth recently was a blip above trend,” said Raghuram Rajan.
Rising affluence in China and India has lifted demand for consumer goods such as PCs and laptops, and this is likely to continue.
“I don’t think there’s an economic roadblock that one can foresee in these countries that would put growth to a stop. They’re hungry, both countries are very hungry. And if they do reasonable things, I think they should be growing on this path,” said Raghuram Rajan.
The IMF expects US GDP growth to slow to 2.9% in 2007, from a projected 3.4% this year.
Source: Channel NewsAsia, 15 September 2006