Mr Lee Yi Shyan at the Business Outlook & Sentiments Series : Forecasts for Q4 & 2009

Speech by Mr Lee Yi Shyan Minister of State for Trade and Industry at the Business Outlook & Sentiments Series : Forecasts for Q4 & 2009 at SBF Seminar Room 2, Keppel Towers on Thursday, 9 Oct 08 at 9:30am

Ladies and Gentleman,

Introduction

I am pleased to join you this morning for the inaugural seminar of the Business Outlook & Sentiments Series organized by the Singapore Business Federation.

Growth of SBF in Singapore

SBF was formed in 2002 to serve as the Apex Business Chamber. The achievements of the organization have been commendable. Last year, SBF reached out to 22,000 participants from 5,800 member companies, organized 220 events and achieved increased participant satisfaction by more than 10%. With the launch of the quarterly Economic Business Outlook & Sentiments series, SBF hopes to provide its members with more timely information on the local and regional landscape and their impact on the business environment.

Outlook for Domestic Economy and Inflation

In August, the government announced that Singapore was expected to grow between 4 and 5% this year, and probably at the lower end of the range. We do not expect a recovery in the major economies anytime soon. The US economy remains sluggish, weighed down by deleveraging and falling house prices. Europe is facing an imminent recession. GDP growth in many Asian economies has slowed down or declined in the second quarter. Some of our export-oriented manufacturing industries, such as electronics and chemicals, have been affected. The recent developments in the US financial industry will also further impact Singapore’s growth.

Fortunately, global commodity prices have eased in recent weeks. Oil prices have declined from a high of US$147 per barrel in mid-July to less than US$100 per barrel. While global food prices remain quite high, the pace of the price increases has slowed down. The moderation in global prices has had a positive impact on our domestic prices. The effect of the GST increase last year has also started to wear off. As a result, Singapore’s headline inflation rate has started to ease. Domestic CPI inflation moderated to 6.4% in August 2008 from 7.5% in April, May and June. We expect to see further moderation in CPI inflation, with inflation for the whole of 2008 coming in between 6 and 7%.

Resilience in certain Industry Sectors

With rising operating costs and the slowdown in the global economy, our companies face challenges. However, certain industry sectors continue to see sustained growth. The overall services sector, which largely comprises SMEs, grew by a healthy 7% in the second quarter of 2008, even though the economy as a whole grew by just 2.1%. Other sectors such as medical technologies, oil & gas, environment and renewable energy, healthcare & wellness, education and lifestyle products and services are also expected to demonstrate good growth.

Opportunities for SMEs

These challenging economic times also provide new opportunities for Singapore companies to venture overseas and seek opportunities in emerging markets such as Latin America, Middle East, Russia and Vietnam, despite the current slowdown. There are many areas where there are opportunities for collaboration, be it in agri-business, food and beverage, electronics, oil and gas, transport, logistics or infrastructure. The development of industries and capabilities of SMEs in these markets will ensure our SMEs continue to retain their competitive edge during this period of economic uncertainty.

Conclusion

I hope that you will find the next few hours useful and informative and that more timely information on the global economic outlook and challenges ahead would allow you to make better planning for your businesses. With this, I wish you all a fruitful seminar.

Thank you.