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SINGAPORE, Oct 30 (Reuters) - Singapore is likely to see
another year of lacklustre economic growth and elevated
inflation in 2013 as exports remain weak and rising rents and
car prices continue to push up the cost of living, its central
bank said on Tuesday.
But the job market will remain tight and "resident wage
growth could rise from 2-3 percent in 2012 to above 3 percent in
2013 even if overall economic growth remains sluggish," the
Monetary Authority of Singapore (MAS) said in its half-yearly
macroeconomic review.
Singapore's gross domestic product growth "is likely to be
positive though below-trend next year", while "CPI-All items
inflation could rise to 4.5 percent temporarily in Q4 2012 and
Q1 2013 from 4.2 percent in Q3" before moderating to around 3.5
percent in the fourth quarter of next year, MAS said.
Wealthy Singapore, a major Asian business and financial
centre, has been making it harder for firms to recruit low-cost
workers from abroad following a backlash from citizens concerned
about overcrowding on trains and buses as well as increased
competition for jobs, schools and housing.
During parliamentary elections last year, Prime Minister Lee
Hsien Loong's long-ruling People's Action Party (PAP) saw its
share of the popular vote fall to a record low of 60 percent and
two ministers were voted out of office.
Singapore authorities expect GDP growth this year to come in
between 1.5 and 2.5 percent, down from 4.9 percent last year and
below what they believe is the economy's trend growth of 3-5
percent.
Inflation, meanwhile, is likely to slightly exceed the
government's most recent forecast of 4.0 to 4.5 percent for
2012, which is already much higher than the 2.5 to 3.5 percent
outlook it gave at the start of the year.
Measures to control the number of cars in the city-state via
certificates of entitlement (COEs) that motorists need before
buying a new vehicle have been one of the main contributors to
inflation.
Bank of America Merrill Lynch, in a report last week,
estimated the government's shift away from its once liberal
foreign labour policy will shave about 1.3 percentage points off
2012 GDP growth, which averaged 1.7 percent year-on-year in the
first nine months.
"Stricter immigration and foreign worker policies is
intended to improve the quality of life for citizens, with less
congestion and competition for housing, and a more protected job
market. But there are also costs, with lower potential growth, a
less dynamic job market, and higher wage-cost inflation," said
Merrill's Southeast Asia economist Chua Hak Bin.
DOMESTIC BOOST
MAS said that while external-oriented sectors such as
manufacturing have suffered from the weakness in Europe and the
slowdown in China, domestic sectors remained buoyant due to the
large number of ongoing projects.
"The more optimistic outlook for domestic-oriented
activities is partly a result of supply-side expansions that are
needed to accommodate a larger population base in Singapore,"
the central bank said.
Projects that Singapore has embarked on include an expanded
public housing programme to meet the surge in demand,
construction of a new airport terminal, new extensions to the
subway network as well as new community hospitals and nursing
homes to cater to a rapidly ageing population.
Earlier on Tuesday, the Straits Times newspaper said a spike
in construction costs had contributed to a more than 70 percent
rise in the estimated cost of building the new Downtown subway
line to S$20.7 billion ($16.95 billion) from an original
estimate of S$12 billion.
MAS described the slowdown that Singapore is currently
facing as a "slow drag", which differed from previous recessions
when the economy experienced a "sharp and decisive" downturn.
"In previous recessions, the external-oriented industries
tended to collapse following a sharp pullback in external
demand. This time round, these industries saw only a gradual
slowing. As a result, the negative spillovers on the cyclically
sensitive domestic activities have been limited."
Singapore's population has jumped over the past decade as a
surge in the number of foreigners more than compensated for a
declining birth rate that is one of the lowest in the world.
The island, which is now more densely populated than Hong
Kong, had a population of 5.3 million last year compared with
4.0 million in 2000. Citizens now account for around 62 percent
of the population, down from around three-quarters at the turn
of the century.
"Since the middle of the last decade, Singapore's resident
population has increased by about 3.1 percent annually, faster
than the post-independence average growth rate of 2.2 percent,"
MAS said.
($1 = 1.2210 Singapore dollars)
(Editing by Kim Coghill)
Source: http://news.yahoo.com/1-singapore-see-slow-growth-high-inflation-2013-040058140--business.html
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