Se Young Lee
The Wall Street Journal
Singapore’s economy is unlikely to average 5% growth per year over the next 10 years, as it did in the past decade, because the city-state has become more developed, Prime Minister Lee Hsien Loong said.
“We must acknowledge that we are now more developed economically than we were 10 or 15 years ago, and we can no longer grow as rapidly as before,” Mr. Lee said in a transcript of a speech released by the government Thursday, noting that Singapore’s economy averaged 5% annual growth from 1999 to 2009. “Overall, if you take it over the next decade, I think 5% will be a stretch.”
Mr. Lee said that 2009 turned out to be a much better year than initially expected, partly because the worst-case scenarios of the global financial crisis didn’t materialize, and partly due to the government’s S$20.5 billion stimulus package designed to cushion the severe fall in external demand.
Initial government estimates released earlier this month show that Singapore’s economy contracted by 2.1% last year. Though this was the first decline since 2001, it was far less than initially feared. The government had forecast in April that the economy would shrink by between 6% and 9% in 2009, though it was later revised up.
Indeed, Singapore’s economy has rebounded quickly as external conditions improved, emerging from the deep slump in the second quarter of 2009. The government expects that the economy will grow by between 3% and 5% this year, but some economists believe the city-state has a potential to post a stronger figure with signs of a broadening recovery in recent exports and manufacturing data.
In the speech, Lee cautioned that global growth will remain weak for several years to come, with U.S. consumers becoming less willing to spend. Still, the prime minister said income per capita can continue to rise if the Singapore work force sharply improves its productivity to compensate for slower growth.
“Our economic strategies and policies have to facilitate this transition to enable the economy to perform to its limits and help Singaporeans to thrive in the new world,” he said. “The Economic Strategies Committee, chaired by Finance Minister Tharman Shanmugaratnam, will publish its recommendations next week, and the government will respond in the budget three weeks after that.”
The 25-member committee, announced by Mr. Lee in May 2009, was formed to develop a road map for sustained and “inclusive” economic growth. It’ll issue its key recommendations on Feb. 1 and release a full report by mid-2010.
Separately, Mr. Lee said that no general election is imminent, though noted it will be due sometime within the next two years. He said the government is implementing changes to the political system that will ensure greater diversity. “We are putting the legislation in place now so that everything will be ready when the elections are called,” he said.