S'pore looks to Southeast Asia for steadying

Lilian Budianto, The Jakarta Post, Singapore   

The future of Singapore's economy, now teetering on the brink of recession, will rely heavily on how well its Southeast Asian neighbors weather the crisis, says the city-state's trade minister. 

"Singapore's economy depends much on its external trade, so as long as our Southeast Asian neighbors can maintain their growth at 4 to 6 percent, Singapore can avoid any further slide," Trade and Industry Minister Lim Hng Kiang said last week during a press briefing with Indonesian journalists. 

Lim said the Singaporean economy had started to slip into a significant slowdown, with the global financial crisis affecting almost all sectors in the most-developed economy in the Southeast Asian region. 

The government predicts economic growth next year will likely slump to 1.5 percent, half of the 3 percent projected for GDP growth in 2008. 

"Our economy relies on external trade with our G3 partners -- the United States, the European Union and Japan -- as well as with Southeast Asian countries. With the U.S. crisis likely to drag that country down and with recovery unpredictable, we put much hope in our Southeast Asian partners," Lim said. 

Singapore's trade with regional partners accounts for one-third of its external trade, with Malaysia topping its trade list, followed by Indonesia and Thailand. In 2007 Singapore's total trade reached S$847 billion (US$576 billion). 

Lim said that with domestic consumption in the region yet to show signs of slowing down, there was high optimism that growth predictions of 4 to 6 percent were reasonable despite the global downturn. 

Indonesia, the biggest economy in the region, is aiming for a growth rate of 6 percent in 2009. 

Lim said Singapore's recovery would also rely on the resiliency of two other rising Asian economies: China and India. The former is now Singapore's third biggest trading partner. 

"Greater Asia is still very promising, with China predicting growth of between 8 and 9 percent and India between 6 and 7 percent. We hope they are able to keep that momentum going and keep projecting positive growth," Lim said. 

He said 2009 would be a slow year for Singapore, with the global economy continuing to see a downturn. 

"Confidence in the economy will remain low next year around the world as fears of credit-card and mortgage defaults will continue," he warned. 

In addition, Lim said he was wary of the slight rise in the unemployment rate, with the manufacturing and financial-service sectors among the first to be affected. Last year Singapore's unemployment rate stood at 2.1 percent. 

As it seeks to avoid financial havoc, Lim said the government would look for new markets to compensate for the slowing demand from its Western markets. 

"China, India, Latin America and the Middle East still have big potential. We are turning to countries with about 6 percent growth," he said. 

Singapore, with a population of around 4 million and no natural resources, has established its economic empire though its manufacturing industries. The manufacturing sector contributes 25 to 30 percent on average to its GDP. 

The crisis in Singapore has started to take its toll on daily life, with consumers cutting spending despite the upcoming Christmas sales season.