News Room - Business/Economics

Posted on 17 Aug 2009

Worst is over for Singapore’s economy

The worst is over for the Singapore economy and the labour market has stabilised, Prime Minister Lee Hsien Loong said as he sounded a note of cautious optimism last night.

 

Although the third quarter should be all right, the outlook beyond it is still unclear, he said, adding: “No signs of Christmas orders pouring in yet.”

 

However, Singapore is well-poised to pick up strongly again because of its comprehensive and decisive response to the downturn, Lee said.

 

Although the economy contracted 6.5 per cent in the first half of the year, it was not as bad as feared, he noted.

 

“The eye of the storm has passed,” he said.

 

Latest figures show that the economy grew 20.7 per cent in the second quarter over the first quarter, the first positive quarter after four quarters of contraction in a row.

 

Recalling the crisis, Lee said the first hint was spotted when he was preparing the National Day message two years ago, when it was “just one little black cloud on the horizon”.

 

At last year’s rally, he warned of the risks of an impending storm.

 

However, when it arrived, it was far worse than anyone had expected, he noted.

 

Swiftly, the Government took action, and Lee noted, when giving his overall assessment of the state of the economy, that the S$20.5 billion (RM50 billion)

 

Resilience Package to tackle the recession had worked.

 

There was no need for a “new prescription now”, he said, adding that before year’s end, the Government will review the situation and decide what needs to be done next year.

 

In the Resilience Package were subsidy schemes that helped save jobs and cut costs.

 

The subsidies for employers’ wage bills as well as workers’ training helped many to keep the same pool of workers even though their output had fallen.

 

However, should the recovery be delayed, companies would be forced to downsize eventually, said Lee.

 

He foresees a subdued global recovery: “It will pick up, but it will not pick up in a hurry.”

 

Still, Singapore can grow by sharpening its skills and expanding its market share, even if world markets are not enlarging quickly, he said.

 

Economists interviewed after the rally said the state of the Christmas orders will be clearer by the end of next month.

 

Said Song Seng Wun of stockbroking company CIMB-GK: “We will get a clearer picture whether businesses will need to hire more for the festive period.”

 

Christmas orders are important for local manufacturers as the festive period is when consumers in countries such as the United States spend heavily.

 

The economists also acknowledged that, at present, there was no need for a second stimulus package.

 

Existing measures have started to kick in, and recent data indicate that the global recession is easing.

 

OCBC Bank’s Selena Ling said: “Singapore had a very good second quarter, but as always, growth still hinges on how fast external demand recovers in countries like the US.”