Monday, November 27, 2006
[RealEdge] BT : Sure, the economy's on a roll, but . . .
| Published November 24, 2006  | |
| Sure, the economy's on a roll, but . . . BEYOND the apparent signs that the Singapore economy is on a roll (but slowing) are a few indicators that suggest that it may be premature to pop the champagne just yet. But first, the good news. From an initial estimate of 3-5 per cent, the economy has grown 8.6 per cent in the first nine months of 2006, with forecast upgrades through the year. Momentum actually picked up in the third quarter, and all sectors turned in decent growth. The construction sector, notably, has shown signs of durably turning around, with a second straight positive quarter. Even if the economy just trots along at a clip barely above stagnant in Q4, it will still reach the lower end of the new official 2006 growth forecast of 7.5-8 per cent. This will be the third year that GDP growth winds up above the medium-term trend of 4-6 per cent - a range that perhaps should be updated, especially if, as many economists agree, the Singapore economy's core potential growth pace may have climbed a notch of late. Better yet, the economic upswing this time looks like it will last longer than in the recent past, economists reckon, thanks to domestic restructuring, pro-growth policies and some decoupling from its main markets. This remains to be seen. But already, the government's early forecast of 2007 growth is pegged at 4-6 per cent, higher than the 3-5 per cent estimate it usually produces at this time for the next year. Meanwhile, for here and now, the robust economy and active job market mean that civil servants and private sector employees will get better bonuses this year. And probably nothing says 'strong economy' better than handsome bonuses. But a few other things in the official Q3 economic report merit some mention, apart from the expectation of a slowdown. Domestic demand grew strongly in Q3, but the government can take all the credit, with its pump-priming. Private consumption, on the other hand, remained subdued - though some rebound is likely soon, what with all the bonuses in hand, the year-end festivities, and a possible spending spree ahead of the anticipated GST hike. And, for all the strong output, the labour productivity figures remain fairly dismal. This may have something to do with the increased labour turnover in recent quarters, but it's one early symptom of job market frenzy. To be sure, the finance sector, for one, has been 'red-hot' for some time, with banks, especially, going on hiring sprees. The Association of Banks in Singapore even issued recruiting guidelines in June, and UBS and Stanchart are now reported to have an informal pact not to poach private bankers from DBS and OCBC. So dire is the manpower shortage that at least one audit firm has decided to enlarge its pool of audit trainees by hiring non-accountancy graduates. This is, from the job-seekers' perspective, well and good. But for the economy, it could presage wage inflation in certain areas. Moreover, it is not clear that the jobs boom is broad-based, and in particular whether Singapore's 70,000 or so jobless people can find work. Of course, an economic boom is nice to have. But it will be even better when it also benefits those at the lower rungs of the ladder. |
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