Economic Outlook for 2008

1.9 The key factor that will shape the growth of the Singapore economy in 2008 is the global economy, especially the state of the US economy. Many private forecasters now expect the US economy to enter a recession in the first half of the year, although it may be mild. If this happens, Asian exports will be affected. However, the IMF and other global forecasters still expect growth in Asia on the whole to remain healthy. China and India are expected to slow down, but still grow at 10% and 8% respectively on the back of strong domestic demand.

1.10 Overall, on all current indications of global conditions, we expect growth of 4.0% to 6.0% in the Singapore economy this year. This is lower than last year, but well in line with the economy's potential over the medium term. Our economic fundamentals remain strong. Our pipeline of manufacturing investments remains robust with EDB expecting $16 billion worth of investment commitments this year, on top of the same volume last year. Our services sector too is well-positioned for growth. While demand for services will depend on the growth of the region and the rest of Asia, we have gained significant mindshare as a global financial and business centre.

1.11 However, there are major downside risks to this year's forecast of growth. A sharper than expected decline in US growth could add to the turmoil in the financial markets, and deepen the credit crunch that is still unfolding. This will inevitably spill over to the Asian economies and markets, and our own growth will be impacted. The outcomes cannot be predicted, but we must be watchful of the risks and be ready to respond to them.