Artfully asking all the correct questions

Jake van der Kamp
South China Morning Post
21 November 2003

And, talking of civic pride, you may have noted the crowing in Singapore at the news that gross domestic product in the third quarter was 5.6 percent higher than in the previous quarter, an achievement not seen for eight years.

What fun we can have with figures! Let us arrange them another way. The big driver of growth was net exports, which, for the year to September, were up 34 percent over the previous year, mostly because there was very little growth in imports.

And why was there so little growth in imports? There is a one-word answer: destocking. Inventories for the 12 months to September were down by the equivalent of more than 11 percent of GDP, which is a big number.

Now include this change in inventories with fixed capital formation in Singapore, take it as a percentage of overall annual GDP and the result is the line you see in the chart, a collapse of domestic investment.

(Chart shows a red line diving from 30% (gross capital formation % GDP) in ’00 down to 15% in ’03. Source: CEIC data)

Oh yes, Singapore’s government is putting together the building blocks to ensure sustained growth in the future. It’s a pity that investors have a different idea of where those blocks should go.

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