Singapore Business Forecast Report Q3 2008

Publication Date	June 2008
Publisher	Business Monitor
Product Type	Report
Pages	63
ISBN Number	1745-0691
Product Code	BMI02043

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Summary

Global Slowdown To Weigh On Growth Singapore's economic growth will moderate this year as a global economic slowdown and US recession impacts the country's key external sector. We foresee downside risks to our .9% growth forecast for 2008, as the city-state may not be able to sufficiently adjust to the braking demand in Europe and the US - the destination for almost a third of Singapore's overseas shipments.

However, a strong level of political stability enables the government to partially direct the economy away from the global slowdown by boosting domestic areas of the economy, in particular the construction sector. Furthermore, Singapore's investor-friendly atmosphere ensures that it will be able to bounce back from the reduced growth that will likely feature in the short term. The country is dedicated to attracting investment and skilled labour from abroad, by maintaining a low tax regime while constantly enhancing the city's infrastructure.

Singapore's top place ranking in Asia's short-term political risk ratings is primarily due to its stable policy-making process. This gives the country a distinct advantage in responding swiftly to the ructions afflicting the world economy and will enable the government to pursue policies to help counter the effects of a suffering external sector. Despite the return of one of Singapore's key opposition figures and the formation of a new Reform Party, we do not anticipate any change to our political risk ratings in the near future. Singapore's ruling People's Action Party (PAP), which holds all but two seats in the city-state's 8 -seat parliament, has been in power since independence in 196 , and our medium-term outlook does not envisage any real threat to the PAP's dominance.

The slowing global economy presents a key downside risk to Singapore's growth this year, due to the city state's heavy dependence on external trade. While domestic spending should help offset some of the threat to overall growth, particularly in areas such as construction, the short-term economic outlook remains relatively poor. Our projection of 5.9% real GDP growth in 2008 is at the upper end of the government's forecast range of 4.0-6.0%. While we recognise the significant downside risks to this, a better than expected performance in Q108 - when the economy expanded by an annualised 16.9% q-o-q (7. % y-o-y), rebounding from a dismal .7% q-o-q contraction in Q407 - has prevented us from lowering our forecast just yet.

Singapore will be able to recover from reduced growth in the medium term because of its excellent business environment. As the economy is so dependent on the external sector, the government has maintained its commitment to attracting FDI and skilled migrants by keeping taxes low and improving its infrastructure. A two percentage point cut in corporate taxes comes into effect in H 08, while personal income taxes are also likely to be reduced in the medium term. Meanwhile, the government's forward-looking attitude towards infrastructure is highlighted by not only upgrading existing facilities such as its container ports, but also by moving into new potential areas of growth, exemplified by the planned construction of a liquefied natural gas (LNG) import terminal. Finally, a climate of negligible corruption and nominal bureaucracy, combined with the government's proactive stance on upholding physical security, strongly promotes commerce and finance, ensuring that the city retains its dominant status as a regional hub for business.

Content

Executive Summary
Global Slowdown To Weigh on growth
Chapter 1: political outlook6
- SWoT analysis
- BMI political risk ratings
- Domestic politics8
- new opposition Unlikely To alter Status Quo
- Enduring political stability in Singapore is largely due to the dominance of the ruling People's Action Party (PAP),
- which has been in power since independence in 1965, winning all but two seats in Parliament in the May 2006
- elections
- Table: Singapore political overview
Chapter 2: economic outlook
- SWoT analysis11
- BMI economic risk ratings
- economic activity
- Downside risks To growth
- According to advance estimates, GDP growth rebounded to a seasonally adjusted annualised 16.9% q-o-q in Q108,
- after contracting by 4.8% q-o-q in Q407, with real growth accelerating from 5.4% to 7.2%
- Table: economic activity
- Monetary policy
- MaS Steps Up policy Tightening
- Inflation remains a key problem in Singapore, with CPI having accelerated to a 26-high of 6.7% y-o-y in March
- Table: Monetary policy
- Fiscal policy
- Budget To Help With rising Living Costs
- After posting a higher than forecast budget surplus in FY2007/08, the Singapore government is in a position to
- provide more help to consumers reeling from the effects of inflation, which is currently running at 26-year highs
- Table: Fiscal policy19
- Balance of payments
- Downside risks For exports
- Singapore's export sector will suffer this year due to the effects of a slowdown in the country's key export
- markets - the US and Europe - and a strengthening domestic currency
- Table: Balance of payments
Chapter 3: Special report
- Business outlook For global Frontier Markets
- growing Fast on The new Frontier
- The 41 states that BMI examines in a new report on our online service may make up only a small slice of the
- world economy, but they possess characteristics that will see them gain importance in the eyes of investors
- and global businesses over the coming years
- Table: Frontier Markets - Key Data and projections For Top 10 Countries
- Frontier investment
- potential and pitfalls
- The spectacular macroeconomic performance of frontier markets in recent years has been matched by mildly
- successful efforts to deepen capital markets
- Table: gDp per Capita, US$ (in order of % increase)
- Table: Diversity Through Frontier Markets - Correlation Coefficients January 2004-April 2008
- Table: Frontier Market indices
- regional overview
- Laos
- Neighbouring economies The Key To growth
- Laos's GDP growth has been boosted in recent years as neighbours China, Thailand and Vietnam compete for
- its natural resources
- Yemen
- Huge potential, But Don't Bank on gCC Membership
- Markets do not come much more frontier than Yemen, and, as would be expected, there is huge potential for
- development, with the prospect of eventual GCC membership likely to act a key investment pull
- Table: Yemen economic activity
- Democratic republic of The Congo
- Mining industry To Drive growth
- The Democratic Republic of the Congo's mining industry will be a key driver of growth and is likely to attract
- significant levels of FDI, with our real GDP forecasts standing at 8.3% and 7.9% in 2008 and 2009, respectively
- Table: Democratic republic of The Congo - economic activity34
- Cuba
- investment prospects after Fidel
- The accession of a new leadership structure in Cuba has sparked excitement that the 45-year-old trade embargo
- with the US may be lifted and Cuba may move toward market liberalisation
- Table: Cuba Macroeconomic Data and Forecasts38
- Mongolia
- Minerals To Drive economic Boom
- Mongolia is in the midst of a massive resource-led economic boom that should lift GDP growth into the double
- digits and underpin robust increases in exports and inflows of foreign investment capital over the long term
- Table: Mongolia - economic activity
Chapter 4: Business environment41
- SWOT analysis
- BMI Business environment risk ratings42
- Business Environment Outlook
- Table: BMI Business and operational risk ratings
- Institutions
- Table: BMI Legal Framework ratings46
- Infrastructure
- Table: Asia, FDI Inflows
- Market orientation
- Table: BMI Trade ratings50
- Table: Top export Destinations (US$mn)
- Operational Risk
Chapter 5: Key Sectors55
- Oil and Gas
- Table: Singapore oil & gas - Historical Data & Forecasts58
- Defence
- Table: Singapore Defence Sector - Historical Data & Forecasts62