RISING prices, in the wake of Singapore’s strong economic rebound, affected households across all income groups in the first six months of this year, according to figures released yesterday.

But cost increases were slowest for the lowest earners – those in the bottom 20 per cent by household income.

This is a departure from recent years when rising prices hit low-income households hardest. Figures from the Statistics Department show that the consumer price index (CPI) for them rose by 1.6 per cent over the same period a year ago.

By contrast, the rise was 2.1 per cent for the highest-earning households – the top 20 per cent of households.

The CPI increase for the 60 per cent of households in between these two segments was 1.9 per cent. The overall CPI for all households was 2.0 per cent in the first six months of the year.

A widely used index for inflation, the CPI assesses changes in the prices of a basket of goods and services – such as food, housing and transport – commonly bought by most households.

The Department of Statistics, which released the figures, said the CPI increase for the lowest 20 per cent income group was mainly due to higher electricity tariffs, service and conservancy charges and food prices among other things.

‘The highest 20 per cent income group experienced a higher inflation rate compared with other income groups… on account of their relatively larger weights for cars and petrol, which registered significant price increases during this period,’ it added.

A cut in certificate of entitlements this year has sent their prices up.

West Coast GRC MP Ho Geok Choo said one reason inflation was moderated for poorer families was due to the efforts of cooperatives like NTUC FairPrice in keeping prices relatively stable.

Such families spend a larger proportion of their income on basics like food.

But economist Tan Khee Giap of the Lee Kuan Yew School of Public Policy said there could be a return to the trend of the poorest being hit hardest if their wages do not surpass inflation as the economy picks up. ‘One should not read too much into these figures yet,’ he said.

Holland-Bukit Timah GRC MP Liang Eng Hwa, like Madam Ho, noted that as costs of other goods and services rise, the lower-income may feel the pinch.

For example, utility prices have risen, he noted.

In January, electricity prices rose 5.4 per cent to 22.87 cents per kilowatt hour (kwh), fuelled by rising oil prices. This worked out to a hike of $4.70 a month for a four-room flat.

Electricity prices went up further to 23.56 cents per kwh in April, and now stand at 24.13 cents per kwh.

Said Mr Liang: ‘While inflation is not really a concern yet, it is something the Government must watch closely.’

In a separate statement, the Statistics Department said inflation for last month climbed less than expected.

Prices rose 2.7 per cent compared to the same month last year, below economists’ forecast of a 3.5 per cent jump.

Almost all goods and services categories saw price inflation for the year to June, led by rising transport costs.

But when compared to May this year, the June prices dipped by 1 per cent.

This was due to lower car prices compared to May and petrol prices, service and conservancy charge rebates, and cheaper clothes and shoes during the Great Singapore Sale.

Still, economists expect inflation to pick up in the coming months, although Citigroup’s Kit Wei Zheng believes the pace will moderate as economic growth eases in the second half of the year.

Most economists also believe the Monetary Authority of Singapore will continue its policy of a gradual appreciation of the Singapore dollar at its next review, rather than tighten policy to further counter inflation.

Source: Straits Times, 24 Jul 2010

(SINGAPORE) While Singapore’s latest growth forecast of 13-15 per cent had surpassed expectations, it reflects a short-term rebound, says Finance Minister Tharman Shanmugaratnam.

‘To put it in perspective, we’ve had two years averaging nearly zero per cent growth,’ Channel News Asia reported him as saying. ‘This year, assuming it’s 15 per cent – taking the upper end of the range – that’s 5 per cent over three years, which is a good performance but not out of sync with what we think is the underlying rate of growth of the Singapore economy, which is 3-5 per cent going forward.’

Mr Tharman added that the focus now was to ensure that an annual growth rate of 3-5 per cent can be sustained through productivity growth.

The Ministry of Trade and Industry last week bumped up the official forecast of Singapore’s 2010 GDP growth by an unprecedented six points to 13-15 per cent, after a sizzling 18 per cent pace in the first half.

The government’s stunningly strong growth forecast on Wednesday caught many by surprise – and prompted an upward revision in the estimates of many private sector economists.The last time Singapore’s full-year growth crossed 13 per cent was in 1972 when the economy grew 13.5 per cent – not far from the all-time high of 13.8 per cent in 1970. Still, MTI made it clear that the first half’s ‘exceptionally strong growth’ is unlikely to be sustained into the second half, with a ‘more subdued outlook’ up ahead.

Source: Business Times, 19 Jul 2010

The benchmark Straits Times Index see-saws amid soft trading volumes

(SINGAPORE) Even as Singapore’s strong second- quarter GDP numbers sent economists rushing to raise their forecasts for the full year, the stock market barely stirred.

The real popping of the champagne will probably come only when Q2 corporate earnings show that economic boom has indeed found its way to companies’ revenues and bottom lines, which in turn would provide a strong impetus for wage hikes, analysts say.

The benchmark Straits Times Index (STI) has see-sawed amid soft trading volumes, rising by 24.11 points or 0.8 per cent on Wednesday when the Q2 economic data was released, before slipping 9.26 points or 0.3 per cent the following day on fears of a slowing US recovery and a potential slowdown in China. Last Friday, the STI edged up 14.17 points or 0.5 per cent to 2,957.72, closing the week 0.99 per cent higher.

Some analysts note that the revised Q1 growth of 16.9 per cent and the record 19.3 per cent Q2 surge were partly a technical bounce from a low base last year. But the average person has yet to feel the benefits, they added.

‘The numbers themselves are not telling the full picture,’ said UOB KayHian executive director Chan Tuck Sing. ‘I have not seen the economic impact from these numbers filtering through to the man in the street.

‘I would be more excited if companies reporting second-quarter earnings show significant improvements in earnings. Then, that’s real money flowing through to the companies.’

The Q2 economic numbers have raised hopes of positive surprises in the upcoming earnings reporting season and provided a snapshot of the type of sectors that are likely to have done well.

Mr Chan expects manufacturing and biomedical companies to post sterling Q2 results.

SIAS Research vice-president Roger Tan anticipates rosy report cards from consumer plays – both domestic and export-oriented – particularly those in the consumer discretionary sector.

‘Technology companies would continue to show strong numbers either matching or beating analysts’ expectations,’ he added. ‘The banks also look like they could come in with strong numbers.’

If the reporting season yields strong earnings and bullish outlooks from company managements, the STI could breach the 3,000 mark, Mr Tan said. SIAS has an STI target of 3,100-3,200 points by year-end.

Credit Suisse maintains ‘market weight’ on the Singapore market following the release of the Q2 GDP numbers, which is one level below ‘overweight’. It expects wages to start picking up over the next two to three quarters, which would boost demand for consumer-related sectors.

‘The key beneficiaries on which we are positive include SPH, SIA, CapitaLand, FCT (Frasers Centrepoint Trust) and Raffles Medical. The robust economic environment also augurs well for the banks,’ Credit Suisse said in a report last week.

‘Banks’ earnings could be boosted by 2 per cent for every 5 per cent incremental loan growth. Asset quality should also benefit,’ Credit Suisse analysts said.

On the other hand, they noted that companies that are wage-sensitive and not in a strong position to pass on the incremental costs immediately include Hi-P, ST Engineering, ComfortDelgro, Cosco Corp, SATS, Hong Leong Asia and SMRT.

CIMB head of research Kenneth Ng said he believes the hospitality, airline and Reit sectors will surprise on the upside, while potential disappointments could come from plantation companies.

Calling equities a ’strong buy’, Wong Kok Hoi, managing director and chief investment officer of APS Asset Management, noted that equities are currently not expensive relative to other asset classes. In the current low interest rate environment, equities offer attractive yields of about 10 per cent compared with bond yields of about 2 per cent.

Historically, Singapore’s GDP and the STI have been strongly correlated. A Barclays Capital research report on Singapore published last year, for instance, showed a graph of the quarter-on-quarter changes in the Singapore GDP and STI since 1997, and the two lines tracked each other well.

But in the near term, market performance continues to hinge on macro issues such as the effects of deleveraging, said Mr Ng. ‘Until those issues are resolved, the markets will find it difficult to forge significantly higher.’

Mr Ng is in no hurry to upgrade his market earnings per share (EPS) forecast. In fact, CIMB downgraded its rating on Singapore from ‘overweight’ to ‘neutral’ in June as a result of those macro concerns.

Though the World Cup season – blamed for taking some of the steam out of the stock market – has ended, the market still lacks a catalyst right now, said Mr Chan of UOB KayHian.

Should corporate earnings turn out to be mediocre and fail to excite investors, the market would remain in range-bound trading, he added.

Source: Business Times, 19 Jul 2010

Strong expansion this year leading to ‘high base’ effect, moderating rate next year, say economists

THE Singapore economy, which may shoot off the charts with its searing expansion this year, is creating another sort of statistical problem – this time for next year’s growth.

Growth figures for this year are so scintillating that some economists have started downgrading the numbers for next year, no thanks to a ‘high base’ effect.

‘One way to think of the economy is like a pendulum: the stronger we swing in one direction – up – this year, the greater the risk of a pullback at some stage,’ said OCBC economist Selena Ling.

The economy ballooned by a formidable 18.1 per cent in the first half of this year over the same period last year, and is expected to grow by 13 to 15 per cent for the full year, the Ministry of Trade and Industry said on Wednesday.

But most economists expect this stupendous growth rate to moderate to between 4 and 5 per cent next year.

‘First-half growth was stellar, and the economy cannot sustain such rapid growth,’ said JP Morgan economist Matt Hildebrandt, who expects 5 per cent growth next year. ‘Thus, growth is going to cool in the second half and it will likely be closer to trend in 2011 than what we have seen over the last year.’

Economists say this year’s record growth is exaggerated by a low base last year due to the recession, but the opposite effect is expected to apply next year.

With such a high base this year, growth in the first half of next year could ‘easily’ go into negative territory, said Standard Chartered economist Alvin Liew. He expects Singapore to grow by 4 per cent for the whole of next year.

Citi economist Kit Wei Zheng on Wednesday ‘fine-tuned’ his forecast for next year to 4.6 per cent, from a previous projection of 5 per cent.

‘The high base in the first half of 2010 will set a high hurdle for growth in the first half of 2011,’ he said.

But the numbers are only part of the story. What is more important are the underlying economic trends that are expected to play out next year.

Economists such as DBS Bank’s Irvin Seah have highlighted a looming slowdown in the manufacturing sector, which has been powering the rebound so far.

‘Manufacturing growth on a sequential basis has cooled, and manufacturing indexes in Singapore and across key markets have peaked and are tapering off,’ said Mr Seah, whose growth forecast for next year is 4.5 per cent.

Agreeing, Mr Hildebrandt said: ‘Most of the demand for electronics and other manufacturing goods comes externally, so the clouded outlooks for the United States and European Union, and the more moderate growth expected in China, provide a lot of uncertainty.’

On the bright side, the domestic services industry should be supported by rising wages amid the tight labour market, said Ms Ling. ‘While the external headwinds are brewing, so far, domestic fundamentals remain healthy,’ she added.

The services sector has not surged as much as manufacturing, which stands it in good stead now, said Mr David Cohen of Action Economics. He is tipping 4.5 per cent growth next year.

‘The swing (in services) has been somewhat less pronounced, but the sector is still showing a healthy recovery to pre- crisis highs,’ he said.

‘It is presumably less vulnerable to a slowdown anytime soon, supported by demand from the region, which continues to pace global growth.’

The two integrated resorts should boost tourist spending and financial and business services are expected to continue doing well next year, said economists. But slower trade flows ahead could weigh down wholesale and transportation services, said Mr Seah.

Source: Straits Times, 16 Jul 2010

Pharma volatility, weird maths may join hands

ONE year after coming off a recession of global proportions, the Singapore economy is headed for possibly a new all-time high growth rate, with GDP expected to surge by between 13 and 15 per cent in 2010. But a technical recession – defined as two consecutive quarters of sequential contraction – within the same year of historic high growth?

That may well be the peculiar scenario shaping up, going by the newly hoisted 13-15 per cent official growth forecast.

As the economists who have dug into the data – just working out the maths, actually – point out, with 18 per cent growth for the first six months in the bag, even if the growth momentum or sequential pace stays flat through the third and fourth quarters, full-year growth would still round out to 17 per cent or a bit more.

Market forecasts of Singapore’s 2010 growth, newly bumped up following the release of the latest quarterly estimates on Wednesday, are now mostly in line with the official 13-15 per cent projection, with at least five – from Goldman Sachs, Daiwa Capital Markets, Morgan Stanley, Citigroup and Credit Suisse – going beyond. Goldman Sachs has the highest forecast at 16.5 per cent. Which means that everyone is expecting at least one negative quarter (in sequential or quarter-on-quarter terms) – or what most describe as a ‘technical pull-back’ from the heady heights of the first six months.

Goldman Sachs, for instance, is looking at a 5 per cent adjusted and annualised q-on-q contraction in Q3, while Citigroup – with a 15.5 per cent growth forecast for the year – reckons it will be more like an 11 per cent pull-back in Q3. In any case, it will be quite a comedown from the blistering 46 per cent and 26 per cent growth notched up in Q1 and Q2.

But at least two forecasters – Capital Economics and JP Morgan – whose full-year growth estimates of 14-14.5 per cent are within the official projection, are looking at two sequential contractions, in Q3 and Q4. A ‘technical’ recession, in other words.

As a Morgan Stanley research report puts it: ‘Our mathematical exercise shows that even if sequential declines of the type seen during the Lehman event in 2008 were to happen, annual 2010 growth would still come round to 13-14 per cent.’

So the official forecast of 13-15 per cent growth necessarily assumes a negative quarter in either Q3 or Q4 – or both. And the Ministry of Trade and Industry has, in fact – though in not quite such words – flagged so as well.

In its statement on the revised 2010 growth forecast, MTI said: ‘While year-on-year growth rates in the second half will be healthy, sequential growth from current levels of economic activity will be low.’

It also hinted at what would likely cause the sharp slowdown in growth momentum in the second half. Industry-specific factors, such as plant maintenance shutdowns in the biomedical manufacturing cluster, will drag down growth, it said.

The pharmaceutical volatility that powered the stratospheric surges in manufacturing output in Q1 and Q2 is also likely to plunge the sector into the red, in sequential terms, in the second half. Payback time.

In other words, the second half ‘recession’ – if it ensues – should be one that is merely statistical beyond the technical sense, with the rest of the economy hopefully still healthy, with no loss of jobs nor decline in incomes and welfare.

Here, prospects are mostly externally driven. On the one hand, Singapore’s GDP is now way past its pre-recession peak in Q1 2008 – a good 13 per cent higher, as a couple of economists note. The economy has recouped its recession losses – and scaled new heights.

But the stream of new data out of the US, even in the past couple of days, points increasingly to ‘imminent slowdown’ ahead.

For now, MTI reckons a double-dip recession in the major economies ‘remains unlikely at this juncture’, even if the pace of the global recovery has moderated. But that probably accounts for the cautionary stance behind its 13-15 per cent growth forecast – which some see as characteristically ‘conservative’. And one that does not preclude the peculiar phenomenon of a ‘recession’ in a boom year.

Source: Business Times, 16 Jul 2010

EXPORTS shot ahead last month with shipments to Europe rocketing up 75 per cent over the same period last month, despite the debt crisis in the region rocking global markets.

All of Singapore’s top 10 destinations took in more exports in June, giving the sector an overall increase of 29 per cent for the month – eclipsing economists’ tips of a 23 per cent rise.

A boost in pharmaceutical shipments helped to magnify figures compared to a low base last year, said Barclays Capital economist Leong Wai Ho.

Exports to Europe also rose because they are ‘headed largely for the core European markets of Germany, the Netherlands and France, which have been less affected by problems in southern Europe’, he added.

Aside from Europe, exports to China grew 39 per cent last month from the year before, following a 64 per cent rise in May, while exports to Japan jumped 50 per cent, according to IE Singapore figures yesterday.

Electronics exports continued to expand, rising 44 per cent last month, while non-electronics products, which include pharmaceuticals, grew 21 per cent over the same month last year.

‘China’s trading partners are expected to benefit from the strong performance of Chinese imports. Imports of our major Asian trading partners, for example, Indonesia and Malaysia, also grew…This has had a positive impact on Singapore’s exports,’ said IE Singapore yesterday.

‘Global semiconductor sales are expected to grow at a much faster pace than in 2009,’ it added.

The June numbers have rounded out the second quarter, which had overall export growth of 28per cent over the same three months last year.

Such robust numbers have led to a rethink on Singapore’s growth prospects.

The Government, citing the stronger-than-expected trade expansion in the second quarter, buoyant demand from Asia and a continued boom in the semiconductor industry, has revised its forecast for non-oil domestic exports growth this year to 17 to 19 per cent, up from a 15 to 17 per cent prediction.

Total trade growth this year has also been revised upwards from between 14 and 16 per cent to 17 to 19 per cent.

But economists warn that export momentum appears to have reached a peak and is due for a slowdown in the second half of the year.

Month-on-month seasonally adjusted figures have decreased marginally for the second straight month, while the pace of growth in electronics has also slowed.

Non-oil domestic exports last month fell 0.1 per cent from May, following a 0.2 per cent fall in May from April.

Electronics shipments last month grew 1.7 per cent from May, compared to a 13.7 per cent jump from April to May.

‘Easing momentum was also seen in other trade components, such as non-oil re-exports and non-oil retained imports of intermediate goods,’ said Citigroup economist Kit Wei Zheng.

HSBC economist Frederic Neumann said that since Singapore is coming from a very high export level, a ‘cool-down does not in itself imply a hard landing’.

Some economists also expect lingering debt problems in Europe to gather pace over the rest of the year.

The Ministry of Trade and Industry said that fiscal austerity measures in some European economies and the weakening of the euro could further weaken domestic demand in Europe.
———————————————-

BENEFITS FROM CHINA

‘China’s trading partners are expected to benefit from the strong performance of Chinese imports. Imports of our major Asian trading partners…also grew. This has had a positive impact on Singapore’s exports.’

IE Singapore

Source: Straits Times, 15 Jul 2010

Many companies retained workers during recession and need not ramp up hiring now that demand has picked up

THE economy may be booming at a record pace and trade figures are through the roof but workers are still waiting for the effects to be felt in the form of fatter pay packets.

Employers and unionists believe the rapidly improving climate will eventually trickle down to the shopfloor, but not just yet.

Wage rises this year are tipped to be under 5 per cent, despite stellar economic growth of between 13 and 15 per cent.

Sakae Holdings chief executive Douglas Foo said that while there has been high gross domestic product growth, ’some retailers are still not feeling that the whole thing has come to the ground level yet’.

‘We are looking at wage increases, but it depends on how competitive the labour market is, and it will be tied in with productivity measures.’

It seems to be largely a problem of supply. Many companies held on to workers during the recession thanks to schemes such as Jobs Credit, so they have not needed to ramp up hiring to meet demand.

‘Just as the recession didn’t really harm the average Joe, neither is the rebound from the recession helping him,’ said economist Manu Bhaskaran, of Centennial Asia Advisors.

UniSIM labour economist Randolph Tan does not believe the 13 to 15 per cent economic growth expected this year will be reflected in wage increases.

Mr Tan said the surge in manufacturing has served to take up the slack of excesses in production and manpower capacity, so wage levels might rise only 3 to 5 per cent this year.

National Trades Union Congress deputy secretary-general Halimah Yacob has picked up the same signals, telling The Straits Times that wage increases of between 3 and 4 per cent are being anticipated in talks going on now with employers and unions in the electronics industry.

Mr Bhaskaran said that the economic growth has been concentrated in capital-intensive manufacturing segments like pharmaceuticals, which do not generally employ many Singaporeans.

The pharmaceutical industry contributes the highest value-added to manufacturing, but employs less than 5,000 workers compared with 76,000 in electronics, or 19 per cent of the manufacturing force.

There are also many multinational companies with a very high foreign share of profits, so ‘it’s not surprising that the portion of growth that boosts the well-being of ordinary folks may not be high’, said Mr Bhaskaran.

Right now, workers in the electronics sector seem to be benefiting the most.

There have been negotiations this month between unions and electronics firms for wage increases, said Mr Francis Lim, president of the United Workers of Electronic and Electrical Industries.

The trickle-down effect may be more muted in services, which make up 65 per cent of the economy. This sector grew 11.4 per cent in the second quarter from the same period a year ago.

While the opening of the two integrated resorts has boosted tourism and retail sales, it has also made it harder to find workers, so companies are making do with what they have.

But while the cash is not flowing into pay packets as fast as workers would like, union leaders and industry chiefs say it is only a matter of time. ‘It looks promising,’ said NTUC’s Madam Halimah. As the economy grows stronger, there will be more jobs chasing workers, she added.

‘So there will be better opportunities for them. We do expect the gains to be shared with the workers, otherwise the companies won’t be able to retain the workers.’

Mr Phillip Overmyer, chief executive of the Singapore International Chamber of Commerce, said: ‘Generally, when we have good, strong years, we have good, strong bonuses at the end of the year.’

Source: Straits Times, 15 Jul 2010

June NODX rose 29 per cent y-o-y, electronic exports jumped sharply

(SINGAPORE) Better than expected Q2 trade figures have led Singapore to raise this year’s forecasts for both total trade and non-oil domestic exports (NODX) growth to between 17 and 19 per cent.

Buoyant trade growth from Asian economies in the first half and Gartner’s upgraded forecast for global semiconductor sales are other reasons for the upgrades, trade agency International Enterprise Singapore said yesterday.

Previous forecasts for both NODX and total trade growth in 2010 were 15-17 per cent and 14-16 per cent respectively. These upgrades accompanied news of a sharp upward revision to the official GDP forecast, and strong trade numbers for June.

NODX grew 29 per cent year-on-year last month, regaining its pace after growth slowed to 24 per cent in May from April’s 30 per cent surge.

Singapore’s NODX in Q2 thus grew a larger than expected 28 per cent year-on-year.

Higher domestic exports of integrated circuits, IC parts and computer parts led to the 44 per cent jump in electronic NODX last month, up from May’s 39 per cent increase.

And the rebound in pharmaceutical exports, as well as increased shipments of petrochemicals and machinery exports, pushed non-electronic NODX 21 per cent higher, after May’s 16 per cent rise.

In sequential terms, however, exports eased for a second straight month in June. After seasonal adjustments, last month’s NODX fell a marginal 0.1 per cent month-on-month, after a 0.2 per cent fall in May.

Economists say this mirrors a regional moderation in the pace of trade growth and the dissipation of low-base effects, and does not affect the strong trade outlook for the year.

HSBC’s Frederic Neumann noted that Korea and Taiwan’s overall shipments cooled markedly in June, while China’s export data (which usually lags other Asian exporters) is expected to slow in the third quarter too.

And while the easing is an indication of softer trade flows ahead, it could also reflect typical mid-year quiet before the large shipping cycle ahead of Christmas begins, Barclays Capital economist Leong Wai Ho said.

Domestic exports to all of Singapore’s top ten NODX markets grew in June, but Europe was the top contributor to NODX expansion.

NODX to the European Union jumped 75 per cent in June, from a pullback to 5.7 per cent growth in May, affirming what most economists have said about the limited impact of Europe’s debt woes and austerity measures on Singapore’s exports.

‘Singapore’s trade with Europe is fairly defensive in that a lot of it is intra-industry in nature, for example pharmaceutical and electronics trade, which is not so easily disrupted,’ said Mr Leong.

Electronic exports to EU jumped 88 per cent while pharmaceutical exports to the region more than doubled.

Other top contributors in June were Japan and China, which saw shipments jump 50 per cent and 39 per cent respectively, though these were smaller than May’s gains.

But NODX to the US stayed flat, as growth in electronic exports was offset by a fall in exports of ships and boats, and medical and electrical circuit apparatus.

Source: Business Times, 15 Jul 2010

MORE than 100,000 foreigners are set to enter Singapore’s workforce this year, an increase fuelled by the record growth the Government is forecasting for the economy this year.

Prime Minister Lee Hsien Loong, in projecting the bigger inflow yesterday, said it was unavoidable as the labour market was bursting at the seams.

‘If we don’t allow the foreign workers in, you are going to have overheating,’ he told Singapore reporters at the end of his six-day official visit to the United States.

However, he assured Singaporeans that the Government is managing the number, saying the foreign worker levies have been calibrated to moderate the inflow.

But Mr Lee added: ‘Even with that, I’d imagine there will be more than 100,000 extra foreign workers this year.

‘I cannot see it otherwise. But we have to accept that.’

Higher levy rates and a tiered system that makes it increasingly costly to employ many lower- and semi-skilled foreign workers were announced in February.

But they came into effect only at the start of this month to give employers time to adjust and to invest in improving productivity, which is Singapore’s new catalyst for growth.

The projected inflow is, however, a slowdown when compared to the surge in 2007 (144,500) and 2008 (157,000), said economists and employers interviewed.

In fact, the pool shrank by 4,200 in the downturn last year, reducing the total foreign population to about one million.

Said economist Leong Wai Ho, of Barclays Capital investment bank, who did not think the new inflow is excessive: ‘The addition of 100,000 probably reflects more discriminate and careful use of foreign workers, now that the levies have gone up.’

Mr Lee’s comments coincided with the Ministry of Trade and Industry’s announcement yesterday of first-half growth heading for a new peak.

It led the ministry to raise its growth forecast for Singapore this year, saying it will be 13 to 15 per cent instead of its earlier projection of 7 to 9 per cent.

The need for more foreign workers this year was implied by PM Lee at the May Day Rally, when he said that given the projected strong growth, ‘a higher inflow of foreign workers is unavoidable’.

Economists like Mr Leong see many of them flowing into the hotel plus food and beverage sectors, as well as high-end industries such as electronics and marine, where demand for semi-skilled S-pass holders is high.

The hospitality sector is particularly hungry for workers, following the opening of the two integrated resorts and a surge in the number of tourists landing on Singapore shores.

Said Hotel Rendezvous general manager Kellvin Ong: ‘Once we hit the quota, it’s very hard to hire more. The Government has to make it more competitive for us to hire foreign workers when we need to.’

About 10 per cent of its 140 employees are foreigners, and like others in the hospitality industry, it struggles to get locals to work in lower-skilled jobs such as waiters and chambermaids.

But most employers cheered PM Lee’s comments, saying it would ease the pressure, especially for small and medium-sized enterprises in sectors struggling to attract Singaporeans.

On top of that, they face a rising wage bill, with the rise in foreign worker levies and the impending one percentage point increase in employers’ contribution rate to the Central Provident Fund.

Said Mr Teo Siong Seng, president of the Singapore Chinese Chamber of Commerce and Industry, which has some 4,000 members: ‘We support the government policies to cut reliance on foreign workers and push for productivity, but in some sectors, it will take time to see results.

‘A more controlled inflow of foreign workers will benefit the country.’

In February, the Government, in making a commitment to reduce the country’s reliance on foreign workers, said it would limit the numbers to one-third of the total workforce, which stands at around three million.

Mr Teo, a Nominated Member of Parliament, cautioned his fellow employers to view this year’s inflow as a ‘temporary relief measure’ and not to let up on their productivity efforts.

The need to focus on a productivity-driven economy to achieve sustainable growth for the next 10 years was also stressed by PM Lee and Manpower Minister Gan Kim Yong.

Said Mr Gan: ‘In the short term, we would need to tap on more foreign workers to support economic growth.’

But it has to be done ‘while maintaining the longer-term goal of reducing over-reliance on foreign workers through investments in productivity’, he added.

Labour MP Josephine Teo said the huge foreign inflow was not a surprise to unionists, following PM Lee’s remarks in his May Day Rally speech.

‘In the short term, we may have to accept opening our doors a little bit more,’ she said, adding that workers in companies facing a shortage may find the increase in foreign workers ‘a welcome relief’.

In the meantime, the labour movement will redouble its efforts to improve productivity, she added.

Source: Straits Times, 15 Jul 2010

PM Lee says economy will overheat if more foreign workers not let in

Lee Hsien Loong sees the inflow of at least another 100,000 foreign workers into the country.

And this despite the government’s efforts to manage the flow with finer calibrations of the foreign worker levy, he told Singapore reporters at the end of a working trip to the United States.

‘Even with that, I imagine there will be more than 100,000 extra foreign workers this year,’ Mr Lee said. ‘I can’t see it otherwise, but we have to accept it.’

He said it can’t be helped because the labour market is already very tight – and without letting in more foreign workers, the economy will overheat.

While Singapore should be happy about its sterling economic performance this year, Mr Lee said it must also guard against the expectations that it can continue to repeat the performance effortlessly year after year.

Instead, he said Singapore must make the most of its good fortunes now to restructure the economy, upgrade workers’ skills and improve overall productivity.

‘Unless we make these structured changes, we will not be able to sustain growth,’ Mr Lee said.

And he doesn’t mean yearly growth of 9-10 per cent, but 3-5 per cent. ‘(If we achieve that), we will be doing well,’ Mr Lee said.

He said the high economic growth attained so far this year partly reflected a rebound from last year’s downturn. It’s also partly due to new projects that have come on stream – in particular the two integrated resorts that have made a big difference in boosting tourism.

Mr Lee sees the sharp spike in pharmaceutical outputs, which have also made a big contribution to economic growth this year, to peter out in the coming months.

Government stimulus, especially the Jobs Credit Scheme, which has just expired, were not much help this year, because the economy is already in full employment, according to him.

‘I don’t see the labour market slackening this year,’ Mr Lee said. ‘We are very tight and we need more workers. So it’s right we have withdrawn the stimulus.’

Singapore’s economic growth beyond ‘the immediate rebound’ will depend more on the region – especially the growth in China and India – the global economy and how far and fast Singapore has moved in economic restructuring, he predicted.

Mr Lee said the government, which has taken steps to cool the heated property market recently, would continue to keep an eye on it. And it would introduce more measures if necessary.

When asked, Mr Lee also said he has not decided when to call for the next general election which is due in 2012. ‘It’s too early to say,’ he said.

Mr Lee and his delegation are due back today.

Source: Business Times, 15 Jul 2010