SPEECH BY DEPUTY PRIME MINISTER LEE HSIEN LOONG IN PARLIAMENT ON

12 OCT 2001

TACKLING THE ECONOMIC DOWNTURN

Introduction

  The Singapore economy is in a severe slowdown. Earlier this week BG George Yeo and Dr Richard Hu announced the third quarter economic results. Our economy contracted by 5.6% compared to a year earlier. In annualised quarter to quarter terms, the contraction was 9.9%. The sustained contraction over the last 3 quarters is the steepest that Singapore has experienced.

  On 25 July, the Government announced a package of measures worth $2.2 billion to help Singaporeans and businesses cope with the downturn. BG George Yeo made clear in his statement in Parliament that this was only an interim package, as the direction of the economy and the severity of the downturn was still uncertain. The Government would monitor developments closely, and stood ready to do more if conditions worsened.

  Since that interim package, conditions have indeed worsened. This was happening even before the terrorist attacks of 11 September. But the 11 September attacks caused major shocks to the US and economies around the world, both short- and long-term. The situation is still fluid, and no one can be certain how events will play out. The US is in all probability already in recession. For Singapore in 2002, MTI’s best guess at this moment of uncertainty is that growth next year will fall somewhere between –2% and +2%.

  Over the next 12 to 18 months, we can expect low growth, more retrenchments and higher unemployment. Even as we cope with the cyclical downturn, we will need to make structural changes in our economy to adapt ourselves to the permanently altered environment. Externally there will be further disruptions, as the US and its coalition partners attack terrorist organisations in Afghanistan, with a high probability of the terrorists striking back. We must therefore psychologically prepare ourselves for a protracted period of difficulties.

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