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     FrontPage Edition: Tue 20 November 2007

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Outlook for Singapore economy in 2008


MTI Forecasts Sustained Growth of 4.5-6.5% in 2008
The Ministry of Trade and Industry (MTI) announced today (19 Nov 2007) that the Singapore economy is expected to grow by 7.5-8.0 per cent in 2007, and 4.5-6.5 per cent in 2008.
Performance in Third Quarter 2007 and Forecast for 2007
Economic growth picked up pace in the third quarter. GDP grew by 8.9 per cent year-on-year, up from the 8.7 per cent increase in the previous quarter.
Growth on an annualised quarter-on-quarter basis declined to 4.3 per cent, down from 14.5 per cent in the second quarter.
The fastest growing sectors were manufacturing (led by the biomedical and transport engineering clusters), financial services, and construction.
For the first three quarters of this year, GDP growth averaged 8.1 per cent. The momentum is likely to continue into the last quarter of 2007, albeit at a slower pace. Economic growth in the US is expected to soften but the EU and Asian economies are expected to hold up.
In view of this, MTI has narrowed its full-year GDP growth forecast for 2007 from 7.0 - 8.0 per cent to 7.5 - 8.0 per cent, with growth likely to be closer to the upper end of this range.
Outlook for 2008
For 2008, external economic conditions are expected to weaken slightly compared to this year. The lingering effects of the sub-prime problems in the credit markets and a more generalised weakening of the housing market will dampen consumption in the US.
Growth in the EU is also expected to soften as a strong currency erodes export competitiveness. However, the outlook for the Asian economies remains positive, with the Chinese economy expected to sustain a double-digit pace of expansion.
MTI forecasts the Singapore economy to grow by 4.5-6.5 per cent in 2008. This represents a moderation in growth towards the economy's underlying potential rate, following four years of above-trend growth.
The market consensus is that the US economy will slow down in the first half of 2008 as a result of weaker credit and housing markets before resuming healthy growth in the second half. This would support GDP growth in Singapore in the upper half of the 4.5-6.5 per cent forecast range.
If the sub-prime problems worsen and persist, or if oil prices rise further above current levels, there could be a sharper and more protracted slowdown in the US economy.
This could drag Singapore’s GDP growth towards the lower half of the forecast range. The likelihood of this more negative scenario will become clearer only after the first quarter of 2008. MTI will monitor the situation closely.

Ministry of Trade and Industry

19 November 2007


Source: Press Release 19 Nov 2007

Related Article:
- Singapore outlook for 2007 and 2008

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