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     FrontPage Edition: Wed 3 January 2007

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Singapore economy expected to grow by 4-6% in 2007



An Excerpt

The economic outlook is positive. There are some downside risks, including a slowing US economy, weaker global electronics demand, and high oil prices. Nevertheless, the global climate remains favourable. Europe looks forward to another year of steady growth.
In Asia, China and India will remain powerful growth engines. Japan also expects to continue growing.
Barring unforeseen setbacks, we expect the Singapore economy to grow by 4-6% in 2007...
Preparing for the Future
Overall, Singapore is in a strong position. But we must not become complacent and slacken. Instead, we must capitalise on this strength to move boldly, and open up a decisive lead over competitors.
Now is the time to press on with restructuring and prepare well ahead for a more challenging future.
This is why we are raising the GST to 7%, and amending the Constitution to draw more Net Investment Income (NII) from our past reserves. These moves will give us extra resources to launch new programmes like Workfare and meet future needs.
We will strengthen our competitiveness by lowering direct taxes when the need arises, particularly on companies.
We will invest in the best education for all our children, improve our infrastructure and our city, and grow our capabilities, including through R&D.
We will consolidate our social cohesion at a time when incomes are stretching out. Globalisation has created prosperity worldwide, but it has also put more pressure on workers in many countries.
They now compete against millions more from China, India and Vietnam entering the world economy. As a result, workers are receiving less than a proportionate share of the increase in their countries¡¯ national output.
This is happening in Singapore too.
In the last five years, our real per-capita GDP grew on average by 4.3% per annum, but real average wages (after adjusting for inflation) grew at only half this rate ¨C 2.1%.
Higher-end wages have risen by more than this. But at the lower-end wages have increased by much less, and some have even stagnated.
This is why we are implementing Workfare as a fourth pillar of our social safety net, together with the CPF, the 3Ms (Medisave, MediShield and Medifund) and HDB home ownership.
Workfare will provide long-term, systematic support for lower-income Singaporeans. We will also continue with programmes to improve the skills and earning power of this group, so that they can uplift themselves and their families.
We will also pay attention to the middle- and higher-income groups. We should help them to provide better for themselves, rather than make them dependent on state support.
NTUC leaders have suggested raising employer CPF contributions for the middle- and higher-income groups. Such a CPF increase will complement the Workfare scheme which covers the lower-income groups. Then all Singaporeans will be able to save more for their housing, retirement and healthcare needs.
The government is studying this idea carefully. Our economy is doing well. The labour market is tight, and wages are rising. A CPF increase makes sense.
But we must not impose too heavy a burden on companies and impair our competitiveness. Provided the outlook stays good, we should be able to raise the employer's CPF contribution rate by 1 to 2 percentage points in 2007.
The Government will discuss this with the employers and unions before making a decision nearer the date of the Budget Speech.
All the favourable developments we enjoy today came from the hard and difficult decisions we made in the last three years, such as the CPF reforms, the restructuring of the economy, and the decision to proceed with the IRs.
Had we flinched and put off painful adjustments, our economy would have lost competitiveness and stagnated.
Singaporeans would have had few opportunities, high unemployment and far fewer jobs than the over 100,000 we created in each of the last two years.

Full Text of Speech

Source: Media Release 31 Dec 2006

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