Published 27 April 2011
The Business Times
Singapore’s economy is likely to grow at the higher end of the official 4-6 per cent forecast this year, while inflation will ease after peaking at 5.2 per cent in the first quarter, the country’s central bank said on Wednesday.
The Monetary Authority of Singapore (MAS), in its latest half-yearly macroeconomic review, also warned of rising wage costs in services as the banking and tourism sectors continue to add staff.
‘The tightness in the labour market is reflected in the rising, or near record high, vacancy rates in several services sectors, which suggests that firms are finding it difficult to fill available positions,’ MAS said.
‘Inflows of foreigners… will generally be lower than in past periods of economic expansion as the government tightens its policies on immigration and low-skilled foreign workers,’ the central bank added.
Singapore’s economy expanded 14.5 per cent last year, helped by a recovery in Asian economies and a surge in immigration over the past five years. The government is, however, slowing the pace at which foreigners are able to work in Singapore due to rising unhappiness among locals.
The ruling People’s Action Party (PAP), which has controlled Singapore since independence, is currently contesting general elections on May 7. MAS said resident wage growth in Singapore could come in slightly lower than the 5.6 per cent recorded in 2010, although it will significantly stronger than the historical average of about 3.3 per cent a year.
On Japan, MAS said the March earthquake could dampen Singapore’s economic activity in the immediate months ahead, but activity is likely to rebound once some normalcy has been restored.
Japan accounted for a relatively small portion of Singapore imports, suggesting minimal disruption to manufacturing, while a fairly high proportion of exporters could benefit as companies shift production to the city-state.
‘As such, while the recent disaster in Japan could cast a pall on the near-term outlook of the Singapore economy, the firm and broad-based growth in first quarter 2011 has set the stage for steady growth for the rest of the year,’ MAS said.
Rigs, Private Banks
In its report, the central bank pointed to heightened activity in several sectors such as rigbuilding, tourism and financial services, especially wealth management.
‘New orders for high-end jack-up rigs should remain strong, given that 70% of the existing fleet are over 20-years old, and will need to be upgraded in line with more stringent global regulation,’ it said.
Singapore’s Keppel Corp and Sembcorp Marine are the world’s two largest oil rig builders. Both have reported a spike in orders since the end of last year.
In financial services, Southeast Asia has started to emerge as a source of growth opportunities for wealth managers and more private banks are using Singapore as their Asian base.
‘High-net-worth individuals in Asean tend to hold a higher percentage of their wealth in cash, providing a significant pool of readily-investible assets,’ MAS said, adding that private banks are hiring aggressively to boost their capabilities in this area.
Asean, which stands for the Association of Southeast Asian Nations, groups Singapore, Malaysia, Thailand, Indonesia, the Philippines, Vietnam, Brunei, Cambodia, Laos and Myanmar.
MAS said inflation peaked at 5.2 per cent year-on-year in the first quarter and could ease to 3 per cent in the fourth-quarter of this year, it said, citing the high base arising from elevated car and accomodation prices in the later part of 2010.
MAS releases its macroeconomic review a few weeks after its monetary policy statement to give economists and traders a better understanding of the thinking behind monetary policy.
Singapore tightened monetary policy further on April 14 by sanctioning an immediate rise in the value of its currency and keeping its stance of allowing a gradual and moderate rise in the Singapore dollar against a basket of currencies.