Singapore to see slow growth, high inflation in 2013 - c.bank

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/singapore-see-slow-growth-high-inflation-2013-c-040000034--business.html

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