MINISTERIAL STATEMENT ON 10 OCT 2001

FINANCE MINISTER DR RICHARD HU & TRADE & INDUSTRY MINISTER MR GEORGE YEO

INTRODUCTION

  Finance Minister Dr Richard Hu and I have called this Press Conference to discuss Singapore’s latest economic results and our near-term economic prospects. We are here to alert Singaporeans to a dramatic change in the external environment.

   After the collapse of the dot.com bubble over a year ago, the global economy was already slowing down. The appalling attacks on September 11 and the resulting train of events have probably tipped the global economy into a recession.

  Before September 11, we had hoped for an earlier recovery from the economic downturn. We must now be prepared for a much longer haul.

EXTERNAL ECONOMIC ENVIRONMENT

  The global economy is experiencing its most severe synchronised deceleration since the 1974 oil shock. Prior to Sept 11 (IMF released this forecast on 27 Sep, but did not factor in the attacks as the attacks were too recent to be analysed fully), the International Monetary Fund (IMF) was already estimating global economic growth in 2001 to slow to only 2.6% (vs 4.7% in 2000), the fastest deceleration in about 30 years. Many economists then expected the US economy to begin its recovery in the last quarter of 2001. Such hope has completely evaporated after the terrorist attacks.

  Before September 11, the US economy was already stagnating. Now it is almost certain to slip into recession. The latest Blue Chip Economic Indicators show 82 per cent of economists polled believing that the US economy is already in recession, up from 13 per cent in the early September survey. 

  Consumer confidence and spending have fallen sharply in the last month. This means that the main engine of US growth has flamed out. The US Conference Board's consumer confidence index plunged to 97.6 during the month of September, the lowest level in five and a half years, from a revised 114 in August. 

  With unemployment rate expected to hit the highest level in more than a decade, consumer confidence is likely to slide further. Even though the US Federal Reserve has cut interest rates twice in less than 3 weeks, it may not be able to counter the economic fallout in the US.

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