Sing$ To Drop 7.5%, Jobless Rate To Rise 7%
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http://www.bloomberg.com/apps/news?p...d=a9SWX.N2oC.0
Singapore Dollar to Drop 7.5% on Slump, Goldman Says
March 19 (Bloomberg) -- The Singapore dollar is likely to drop 7.5 percent to S$1.64 versus the greenback over the next three months as a deteriorating economy prompts the central bank to favor a weaker currency, Goldman Sachs Group Inc. said.
The bank cut its estimate from S$1.56 and revised its 2009 gross domestic product growth forecast to minus 8 percent, double the pace of contraction previously projected, Hong Kong- based economist Enoch Fung wrote in a report published today.
“We are factoring in a more protracted downturn into our GDP growth forecast,� Fung said. “The Monetary Authority of Singapore is likely to weaken the SGD by shifting the policy band lower at their next scheduled meeting in April.�
Goldman lowered its 12-month forecast for the currency to S$1.58 from S$1.52. The Singapore dollar recently traded at S$1.5166 against the U.S. currency.
The city-state’s currency has declined 4.9 percent this year, according to data compiled by Bloomberg. That compares with a 10 percent slide in the Korean won, the worst performer among Asia’s 10 most-active currencies excluding the yen.
A quarterly survey by Singapore’s central bank earlier this week saw economists forecasting a 4.9 percent contraction in the economy this year, compared with a prediction for 1 percent decline earlier. Minister Mentor Lee Kuan Yew predicts the economy may shrink as much as 10 percent this year should exports continue to plunge, versus a government projection for a 5 percent contraction.
Highest Exposure
“Singapore has one of the highest exposures to weakness in external demand because of its high ratio of exports to GDP and the high portion of export-driven demand,� Fung said.
UBS AG, the world’s second-largest currency trader, and HSBC Holdings Plc also said Singapore’s central bank will seek a weaker currency at its April policy review. The city’s dollar may fall to S$1.63 in three months, and rebound to S$1.60 by year-end, Nizam Idris, a Singapore-based currency strategist at UBS, wrote in a research report yesterday.
Singapore’s economy will contract 9 percent this year and the central bank “will probably announce a one-off depreciation of its nominal trade-weighted exchange rate when it next meets on April 9 and this is likely to be in the order of 2 percent or so,� wrote Robert Prior-Wandesforde, a senior economist at HSBC in Singapore, in a report today.
Jobless Rate
The unemployment rate rose to 2.5 percent in the fourth quarter of 2008, from 2.2 percent in the previous three months, the Ministry of Manpower reported on March 16. The jobless rate will rise to 7 percent in 2010, hurting private consumption further, Goldman’s Fung wrote in his note.
Singapore’s central bank conducts its monetary policy by guiding the local dollar within an undisclosed band of trade- weighted currencies of major trading partners. It holds its monetary policy meeting twice yearly.
The Monetary Authority of Singapore adopted a faster currency appreciation in October 2007, announced a one-off strengthening in April 2008 and stopped favoring gains in October last year. -
Singapore fares worst
Wednesday, 18 March 2009
Singapore will be Southeast Asia's weakest economy, shrinking nearly 5 per cent this year, while Thailand faces its worst recession in 11 years, reflecting a collapse in exports across Asia, a Reuters poll shows.
The Philippines and Indonesia will be the only economies in Southeast Asia to record growth this year but that growth will be sharply slower than in previous years with Indonesia hit by falling prices of commodities, the bulk of its exports.
Singapore's gross domestic product, or the value of all goods and services produced, is set to shrink 4.9 per cent in 2009, according to the median forecast of the Reuters quarterly poll.
It would be the city-state's worst-ever economic slump and mark a sharp a turnaround after averaging 6.4 per cent annual growth over the past five years. But analysts foresee it rebounding 3.9 per cent in 2010 as fiscal stimulus kicks in.
In contrast, Southeast Asia's biggest economy, Indonesia, is poised to expand by 4 per cent this year, and 5.1 per cent in 2010, as exports contribute only about a third of GDP, making it much less dependent on trade than its neighbours.
Still, the growth forecast is well down from a 4.8 per cent estimate in a poll three months ago. Weak exports and falling commodities prices weigh on growth, and analysts said the government needs to take further steps to support the economy on top of last month's US$6.1 billion (S$9.31 billion) fiscal stimulus package.
In Malaysia and Thailand, demand is hurt by crumbling exports. Thailand's economy is set to shrink 1.5 per cent this year while Malaysia will see a 1.2 per cent contraction. The poll forecast Malaysia would pick up slightly next year, with GDP growing 2.8 per cent while Thailand is set for a 2.9 per cent expansion in 2010.
The forecast that the economy will shrink 1.5 per cent this year reverses a 2.8 per cent growth forecast three months ago and an actual 2.6 per cent expansion in 2008.
For the Philippines, the poll forecast the economy to expand by just 2.3 per cent this year, lower than a 3.3 per cent growth estimate in a similar poll in December and below government expectations for at least 3.7 per cent growth, as a deepening global recession chokes exports and slows remittance inflows.
http://business.inquirer.net/money/breakingnews -
in our industry a weak singapore dollar is good news for us. Coz we are export base.
Strong USD will impact importer.
Since we are export base economy, a weak SGD be better for our economy generally.
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not really lower SGD is better - we do need to import and consume......we are a country with no natural resources except people n human resource
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that why i say generally it is better for singapore economy. i also mention the importers will be impacted.
by the way, not all importer buy in USD. maybe our chicken , duck supply, are paid in ringgit and SGD right?
all exporters that sold in USD when converting back to SGD will generate bigger profits.
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how come sporeans have to read the truth about the economy FROM foreign medias instead of the usual ST newspapers? oh i wonder..
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Originally posted by Alextoh71:
not really lower SGD is better – we do need to import and consume…...we are a country with no natural resources except people n human resource
export more than import, so will genrally be good.
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Originally posted by fishbuff1:
how come sporeans have to read the truth about the economy FROM foreign medias instead of the usual ST newspapers? oh i wonder..
because some people only believe foreign medias.
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Cracks appear in Lee's mantle
By Shawn W Crispin
Corp (GIC), Temasek Holdings PTE, and, perhaps most crucially, the Central Provident Fund, which is drawing more critical attention. Earlier this month the Straits Times reported that GIC's assets, often roughly estimated at US$300 billion, had fallen by around 25% off their peak of last year.
While a populist backlash against perceived corrupt bankers and financiers mounts in the United States, all is comparatively calm in financial hub Singapore, where the state and finance sector are virtually one and the same.
Yet some analysts wonder whether the deepening downturn could eventually spark popular calls for political change to the People's Action Party (PAP)-led government, similar to the mass mobilizations that ousted Indonesia's and nearly toppled Malaysia's entrenched authoritarian regimes amid the 1997-98 Asian financial crisis.
Prime Minister Lee Hsien Loong faces Singapore's worst economic crisis since it achieved independence in 1965 and some analysts believe his handling of the downturn will determine largely his future staying power as premier once his influential 85-year-old father, Minister Mentor and national founder Lee Kuan Yew, eventually passes from the scene.
The senior Lee warned earlier this month that gross domestic product (GDP) growth could contract by as much as 8% this year. As one of Asia's most open economies, where exports of goods and services last year accounted for around 145% of GDP, Singapore has been especially hard hit by the collapse in global trade. Investment bank Credit Suisse estimates every 10% lost in goods and services exports will through first round effects shave 7.2% off Singapore's GDP.
But it's Lee's government's financial management, particularly its role in running the Government of Singapore Investment
The state-controlled newspaper quoted the senior Lee saying that GIC had invested "too early" when it took stakes in early 2008 in Swiss investment bank UBS and now diminished US banking giant Citibank. Until a recent preferred to common stock swap, GIC had lost 80% on its Citibank gambit.
Singaporean eyebrows also rose earlier this year when Temasek chief executive officer Ho Ching, the wife of Prime Minister Lee, announced she would step down from her post in October and be replaced with an Australian national. Temasek executives have said that her resignation is not related to the investment company's recent financial performance, which in historical terms has tanked.
The sovereign fund shed 31% of assets' value between April and November 2008, driving its portfolio down to US$127 billion, according to a Ministry of Finance report made to parliament. Some analysts expect even worse when the sovereign fund announces its total annual results, expected in the weeks ahead. The senior Lee was quoted saying in the local press that there was "no equal" inside Temasek to the outside Australian national candidate appointed to the post, but later backtracked on the comment.
The mentor minister's flip-flop about Temasek's top management capabilities struck some as odd, considering the sovereign fund had until recently claimed to have earned an average 18% in total annual shareholder returns. It's notable in retrospect that the International Monetary Fund (IMF), in a 2006 report, inquired Temasek managers whether they "took into account the impact of its investment on the overall economy's exposure to sectors and countries".
Temasek officials responded that the outward expansion was done "cautiously and selectively, overseen by an independent board". Authorities also told the IMF then that "disclosing further information on GIC's operations and financial position was difficult because of strategic reasons, but underscored that such investments were largely in liquid assets and undertaken with sufficient internal oversight".
The IMF said in an August 2008 report that GIC's and Temasek's operations "do not appear to undercut the formulation or conduct of domestic policies", though this assessment was made before government officials revealed the extent of their recent losses.
Pension questions
Opposition politician and political scientist James Gomez, for one, believes that the mounting crisis has exposed flaws in the government's economic management. He says that while Temasek's and GIC's losses have not overtly affected the day-to-day lives of most Singaporeans, they could eventually impact on the Central Provident Fund (CPF), a state-run compulsory social security program.
The CPF board has consistently said it only invests funds in "risk-free" government bonds and bank deposits, but both opposition and PAP politicians have contradicted those claims. Opposition politicians, including Low Thia Khiang, have questioned whether the funds paid into the CPF actually provide a de facto cheap source of finance for GIC in particular to invest abroad.
GIC officially acknowledges that it invests overseas some of the proceeds raised from government bonds. However, the government does not publicly release information on assets held abroad or data on the position of the consolidated public sector, according to the IMF. That's historically raised criticisms that could intensify in the months ahead as the economy weakens. Opposition MP Low was quoted in the Straits Times in September 2007 asking in parliament whether the "government short-changes Singaporeans by giving CPF members 3.5% of the interest rate while the GIC makes 9% and pockets the balance of 5.5%".
Gomez says that because there is no clear evidence to show that CPF funds have disappeared with GIC's and Temasek's recent losses, there has not yet been a public reaction against the two investment funds' management. However, he contends there is a growing "disquiet" about the various mechanisms the government has since 2007 put in place to delay CPF disbursements to the population, including a rise in the minimum retirement age.
Those measures are a reflection, some believe, of the CPF's weak financial position, which analysts say has been hampered by a pro-business government policy in recent years to substantially reduce employers' payments into the scheme. The IMF said in 2006 that "steps are needed to increase income replacement rates for retirees relying on their [CPF] savings". It's not apparent - three years later and amid the country's worst ever economic crisis - that those recommended steps have been taken.
There are other areas of potential popular agitation, including a nagging perception, expressed on blogs and among the political opposition, that top government officials are grossly overpaid. In April 2007, ministers received a 60% pay hike, bumping their pay to an average of US$1.2 million per year. Prime Minister Lee's salary jumped at the time to the Singapore dollar equivalent of US$2 million. The official pay hikes were justified by a compensation system created in 1994 by the senior Lee, then premier, that pegged top officials' salaries to what they might earn at the same level in the private sector.
Then, the senior Lee strongly defended the hefty pay hikes, warning the previous month that without them "your jobs will be in peril, your security at risk and our women will become maids in other people's countries". With the global downturn, at least the first of those dire warnings has come a cropper for many Singaporeans, though there are no indications yet government ministers' salaries will be cut back in line with rising global discontent over perceived corruption in top level corporate compensation packages.
Prime Minister Lee has responded to the mounting economic crisis through vigorous fiscal pump priming. The government's 2009 budget entails fiscal measures, including a heavy dose of off-budget loan guarantees, which amount to 8% of GDP, the largest such percentage in Asia. Underscoring the potential depth of Singapore's crisis, the fiscal package is nearly twice the amount as a percentage of GDP the government mobilized in the wake of the 1997-98 Asian financial crisis. Half of the fiscal cash is expected to be injected into the economy this year, according to Credit Suisse.
Whether this will be enough to keep rising social discontent from morphing into calls for political change and greater government transparency is still unclear. Opposition politician Gomez contends that most Singaporeans are "too fearful too express their desire for political change" in light of the government's notoriously harsh handling of its critics, including the use of crippling defamation suits to bankrupt opposition politicians.
He believes that the government's fiscal strategy amounts to "cash handouts to mitigate criticism", which, he concedes could still work in Singapore's materialistic society. But Singapore's wealth has recently greatly diminished, perhaps more than many realize, and as the global economic crisis bites deeper at home, it's possible that desperate Singaporeans look to pin the blame on Lee's government.
Shawn W Crispin is Asia Times Online's Southeast Asia Editor. He may be reached at swcrispin@atimes.com. -
if every nation's currency is dropping, then relative to each other there's no real difference right?? lol, i'm lousy at finance
