John Burton and Shawn Donnan
18 November 2003
Singapore’s economy grew by 1.7 per cent in the third quarter from a year ago, exceeding government estimates. But the unemployment rate of 5.9 per cent in the same period was the highest since the mid-1980s.
Gross domestic product, which shrank by 3.8 per cent in the second quarter because of the Iraq war and the outbreak of Sars, rebounded as tourism recovered and global demand for exports increased.
GDP expanded by 17.3 per cent in the third quarter from the second quarter, when it contracted at an annualised rate of 9.8 per cent from the first quarter. Manufacturing expanded by 3.3 per cent from a year ago and 24.4 per cent from the second quarter.
Economists said the third quarter performance suggested that Singapore would achieve GDP growth of 0.5-1 per cent for 2003 and 3-5 per cent in 2004.
Officials said the recovery had encouraged more people to seek jobs, raising the jobless rate from 4.5 per cent in the second quarter.
Lee Hsien Loong, finance minister, said Singapore should benefit from an expected economic recovery in US and Japan next year, which should increase exports of electronics, pharmaceuticals and chemicals.
However, construction, which has been in a slump for more than two years, remained depressed in the third quarter, contracting by 9.1 per cent from a year ago.
Analysts also expressed disappointment with the performance of the services industry, which grew 1.7 per cent in the third quarter from a year ago after it contracted 2.8 per cent in the previous quarter.
Neighbouring Indonesia’s economy grew 3.9 per cent year on year in the third quarter, according to statistics released yesterday.
The result was broadly in line with economists’ expectations and represents more good news for Indonesia’s macro-economy and the government’s chances of achieving the 4 per cent growth target in 2003.
But economists say the make-up of Indonesia’s growth continues to have a potentially worrying trend. South-east Asia’s largest economy needs to grow 6-7 per cent to absorb the millions of new people looking for work each year.
However, Indonesia’s growth remains driven by consumption – private consumption rose 4.8 per cent year-on-year in the third quarter – and most believe the necessary boost in growth is unlikely to occur until investment picks up.
Analysts say a poor investment climate, caused largely by aweak judiciary and risks associated with terrorism, means foreign and local investment are close to stagnant. Investment in the third quarter grew by just 0.03 per cent, according to official figures.