SINGAPORE: Singapore remains competitive on the international stage, Minister of Trade and Industry Lim Hng Kiang told Parliament on Monday amidst the city's poor economic performance and fears of recession. Citing the 2012 World Economic Forum's Global Competitiveness Index, he said Singapore maintained its ranking. Recent economic estimates showed the Singapore economy had contracted by 1.5 percent in the third quarter, on a quarter-on-quarter seasonally adjusted annualized basis. However, the minister said Singapore has not entered into a technical recession. He said while the country has avoided two consecutive quarters of decline, economic growth for the first three quarters of 2012 was lacklustre, at 1.7 percent on a year-on-year basis. Lim said the muted economic growth was largely due to the challenging global economic conditions, which slowed Singapore's exports growth and caused its current account surplus to decline from S$35 billion in the first half of last year to S$27 billion in the first half of this year. Over the medium term, Lim said the strengthening of the Singapore dollar is a key macroeconomic policy tool to keep inflation in check. However, the exchange rate cannot be used as a tool to manage Singapore's export competitiveness. The minister argued that competitiveness can only be achieved over the long-term, through higher productivity and through innovation such as creating new products that the market demands. “The trend appreciation of the Singapore dollar exchange rate is in line with our economic fundamentals. It keeps inflation low and stable, which helps to preserve the purchasing power of Singaporeans' income and savings,” said Lim. “Given that Singapore's labor market remains healthy, with strong employment creation and a low unemployment rate, there is no immediate need for the government to step in with measures to cushion the economy from the slowdown in external demand,” he added. The country's Gross Domestic Product (GDP) fell an annualized 1.5 percent in the three months through September from the previous quarter, when it expanded a revised 0.2 percent, the Trade Ministry said on Friday. The central bank, which uses the currency to manage inflation, said it will maintain a modest and gradual appreciation of the local dollar. But fears are continue to gain steam here that the country is headed towards recession, much like the economies of Europe as inflation rises and current worries take hold. Prime Minister Lee Hsien Loong said that he is confident the city-state will avoid being the first major Asian economy to fall into recession this year as there are positive job numbers in the city. The country's inflation slowed to its lowest in two years in August as the global economy continues to be weakened and saw reduced pressure for price increases. The inflation drop also gives the city-state's central bank more mobility to ease monetary policy next month. The consumer price index is expected to rise 3.6 percent in August from a year earlier, down sharply from July's 4.0 percent, according to the median estimate of 11 economists polled by Reuters news agency. If accurate, it would be the lowest it has been in the country since October 2010, when it was reported at 3.5 percent. The core inflation measure, which excludes housing and private car prices, probably rose 2.3 percent year-on-year, slowing from July's 2.4 percent. The Monetary Authority of Singapore (MAS) looks more closely at the core figure when setting policy. “Headline inflation probably eased to 3.6 percent in August, helped in part by a high base last year for transport and housing," Bank of America Merrill Lynch said in a note to clients. “The lower inflation reading will likely give the MAS room to ease policy at the October meeting." Singapore's economy shrank less than anticipated in the second quarter, thanks to a surge in pharmaceutical production in June, gross domestic product (GDP) data showed last month. Economists have told Bikyamasr.com they expect the Southeast Asian city-state's gross domestic product to grow 2.4 percent this year, down from a median estimate of 3.0 percent three months earlier, the central bank's latest quarterly Survey of Professional Forecasters showed.
