GuideMeSingapore

2011 has gone and 2012 is here. While the past year has proven to be significant for the Singapore economy, what can we expect in the future? What promise does 2012 hold for Singapore’s economy? Will Singapore shine or will it buckle under the worsening European debt crisis?

Despite fears over a heightened economic recession in Europe, analysts have not been entirely negative about what Singapore’s position is likely to be during this year. While Singapore’s Ministry of Trade and Industry has forecast a growth of 1-3% for 2012, private sector economists have forecast a growth of 3-3.9%. The trade and manufacturing sectors will probably be the worst hit, but with a strong services sector, a firm government policy, and a heightened national productivity drive Singapore might just manage to tide over tough times.

Services sector growth

The MICE industry is one of the promising sectors for 2012. Even though 2011 was marked by economic turbulence, the bookings for corporate events and meetings by local and foreign companies in Singapore’s hotels was more than robust. In fact, MICE bookings are reported to have increased by 12-50% y-o-y and the outlook for 2012 is positive. The Tourism Board of Singapore is highly optimistic about the MICE sector in 2012 as it expects a strong demand from the Asian economies. Recent news reports also confirm that tourism receipts recorded augmented growth in 2011 with bulk of the share coming from Asia. It is likely that in 2012 tourism receipts from western markets will be subdued given the economic slowdown in these regions but business and leisure travellers from the Asian economies may positively impact the tourism industry. Growth in the tourism sector will subsequently have positive spin-offs for other sectors as well. In other words, the services sector might bode well for Singapore’s economy in 2012.

Strong construction demand

The construction industry is yet another sector that may prove to be beneficial to Singapore’s economy this year. A latest news report confirms that the construction industry is upbeat about business prospects in 2012, characterized by a strong demand that is expected to rake in receipts from between S$21 billion to S$27 billion.

National productivity drive

Keeping in mind future economic volatility, the Singapore government has announced plans of stepping up its national productivity drive to include four new sectors in addition to the 12 sectors that were identified in 2010. The new sectors of financial services, accountancy, social services and process construction & maintenance in addition to the existing sectors will represent 55% of Singapore’s GDP (up from 40%) and 60% of employment (up from 55%). The enhanced national productivity drive is particularly significant at this moment in time as it is expected to aid in the long term structuring of the economy during this current period of slowdown.  According to Deputy Prime Minister Tharman Shanmugaratnam, “One of the advantages that we have compared to some of the Western economies is that we have resources to be applied to helping companies invest and helping workers get trained. We do have the resources and we intend to use it.”

Attracting foreign investment

Another factor that might help Singapore stand in good stead is its ability to attract foreign investments. Strong fundamentals such as a pro-business climate, excellent infrastructure, trade links with major economies, efficient legal system, low taxes, a strong talent base, political stability, and economic resilience have helped attract entrepreneurs and MNCs to set up a company in Singapore. In December last year, Google announced plans of setting up a data center in Singapore. Other global companies are also continuing to expand their presence in the region by opting for Singapore incorporation. An analysis of Singapore company registration statistics reveals that there were a total of 55,699 companies that were established in the Republic in 2011. Commenting on the impact of a recession on investment patterns, Mr Leo Yip, Chairman of the Singapore Economic Development Board said, “Even though the world economy was not in good shape, it gave confidence to companies that this is the place to continue to be when the global economy recovers, and that was indeed the picture every company saw. We saw that in the way investments that were deferred during the recession were quickly reinstated once the global economy started to recover.”

Singapore relies heavily on trade and given the global economic conditions it is unlikely that the nation will remain insulated from volatility in the external environment. Economic growth is definitely expected to slow down this year but businesses and government agencies are bracing themselves for the challenging environment ahead so they can cushion themselves against severe shocks. 39% of Singapore companies that were included in a survey conducted by the Singapore Chinese Chamber of Commerce and Industry said that they were restructuring their operations for business survival.

So how good or bad will 2012 prove to be for Singapore’s economy? Well, there are no answers to that by gazing into the crystal ball. We’ll just have to wait and see. In the meantime, here are Conrad Raj’s, Editor-At-Large of Today (An English daily in Singapore), views on what he thinks is in store for Singapore’s economy in 2012.