NTU don sees protracted recession, U-shape recovery, Zero growth in 2009, upturn only in 2010, IR delays expected
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NTU don sees protracted recession, U-shape recovery
Zero growth in 2009, upturn only in 2010, IR delays expected
By LYNETTE KHOO
(SINGAPORE) Singapore will probably suffer a protracted recession that will end with a U-shape recovery only in 2010, says a Nanyang Technological University (NTU) economist.
And this means the economy will probably miss the government’s 3 per cent GDP growth forecast this year and see zero growth next year.
‘Although we have made tremendous efforts to diversify our economy, particularly in services and manufacturing, the major markets US and Europe are not doing very well and this is making our recovery very difficult,’ said Associate Professor Tan Khee Giap, who heads the Central Banking Policies Research Unit and the Asean Economies Monitoring Unit at NTU.
The two integrated resorts (IRs) are unlikely to kick in before 2010, even though Marina Bay Sands is slated to open late next year, he noted. This also could add to the expected delay in any GDP rebound.
The eventual rebound will be markedly different from the quick recovery after Sars in 2003 and the commodity price slump in 1987, when major financial markets were not in trouble, Prof Tan said.
He was speaking at a panel discussion yesterday at NTU on the financial crisis and its implications for Singapore’s economy.
Lilian Ng, Visiting Professor of Finance at Nanyang Business School, said she is confident there will be no repeat of the Great Depression of the 1930s, as concerted efforts by governments and central banks worldwide have mitigated the turmoil and restored a degree of trust.
‘Markets are more integrated now than they were years ago,’ she said. ‘When the US crisis hit, all the governments of the major economies came together to act on the situation. Given the concerted action, I don’t see we will be in the same situation as 80 years ago.’
But Prof Tan said that with money markets in the US and Europe still in a flux despite central bank intervention and huge capital injections into banks, financial markets will likely remain on a rollercoaster ride until the end of this year.
This means continued weakness for Singapore’s financial markets, he said.
While job growth is likely to slow in some sectors, Prof Tan said the cushioning effect of some 20,000 new jobs from the IRs could prevent net job losses in the overall economy. The onus is on government to make sure locals fill vacancies first.
‘We must concentrate on getting the senior workers and housewives back to work as they will be hit very hard,’ Prof Tan said.
He also believes that fiscal policies, such as bringing forward construction projects postponed earlier because of supply constraints, may help stimulate job numbers. If the cushioning effect plays out well, there may not be a spike in unemployment, he reckons.
With the economic slump ahead, Prof Tan urged East Asian governments to continue to prime their economies with surpluses from sovereign wealth funds and foreign exchange reserves.
‘But there is no free lunch,’ he said. ‘If you want money from East Asia, East Asian governments and East Asian views should be incorporated in international agencies such as the IMF, Bank for International Settlements and the World Bank.’
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