Economists hike growth forecasts to median of 7.5%

Taking a cue from the government, private-sector economists have bumped up their forecasts of Singapore’s 2007 economic growth to a median of 7.5 per cent, with the most optimistic gunning for 8.1 per cent.

The 7.5 per cent forecast from 18 respondents to the Monetary Authority of Singapore’s quarterly survey of professional forecasters last month is 1.5 percentage points higher than the May poll’s results – and smack in the middle of the latest revised 7-8 per cent official growth forecast.

The 2007 growth forecasts from the latest MAS poll – which range from 6.7 to 8.1 per cent – are heavily skewed towards the high end.

The survey respondents put a near-50 per cent chance on the economy growing 7 to 7.9 per cent this year and a 23 per cent probability that growth will be in the 8 to 8.9 per cent range.

The economy grew 7.6 per cent in the first six months of 2007, and the forecasters expect the pace to continue in the second half.

The economists see third-quarter growth at a median 7.8 per cent, and fourth quarter at 7.6 per cent. Growth this year is expected to be driven by two resurgent sectors in particular – financial services and construction.

The forecasters see financial services growing a median 12.2 per cent in Q3 and 13.5 per cent year-round.

For construction, the estimates are a median 15 per cent growth, for both Q3 and year-round. The sector grew 17.6 in Q2, when overall GDP expanded a blistering 8.6 per cent.

Among other key indicators, the economists forecast inflation to come in at 1.5 per cent this year and the jobless rate to edge down to 2.5 per cent by year-end.

Next year, GDP growth is projected to moderate to 6.5 per cent. This too has been raised from an earlier estimate of 5.8 per cent in the previous survey. The economists reckoned that the Singapore economy will most likely grow between 6 and 6.9 per cent.

Source : Business Times – 06 Sept 2007

Sunset Way’s bold and trendy makeover benefits retailers

HEARTLAND shops in the once sleepy neighbourhood centre of Sunset Way have undergone a bold transformation to become Singapore’s next hot dining spot.

Not long ago, these 50 or so Housing Board (HDB) shops were almost forgotten as a number of struggling businesses took a payout to leave. Now, the area is buzzing with new life, as crowds throng trendy new wine shops, cafes, pubs and restaurants – all in a relaxed, alfresco setting.

Sunset Way’s new look will only get better: its town council and the HDB will pump in another $1.5 million to complete its makeover, said Mr Andrew Lim, chairman of the Sunset Way Trades Association (SWTA).

The estate is fast challenging hot spots such as Holland Village and Dempsey Road, due to its lush greenery and charm – and much cheaper rental prices for retailers.

Some new food and beverage retailers told The Straits Times they looked at Tanglin Village before settling on Sunset Way, forking out an average $250,000 to set up shop.

One tenant, who did not want to be named, said he was paying rent of about $5.50 per sq ft (psf).

That is far cheaper than the rent at Holland Village of $15 psf, and those at Tanglin Village of about $8 to $10 psf, as well as nearby Rochester Park of about $12 psf, estimated Sunset Way’s master tenant, Mr Victor Koh of Circles International Solutions. ‘I did my research before deciding on the prices here. It’s important to be affordable when the estate’s just starting again.’

The rejuvenated HDB neighbourhood centre – comprising about 50 shops from Block 105 to 109 in Clementi – is the first success story under the HDB’s Restructuring Programme for Shops.

Launched in 2005, it gives struggling retailers in a location a way out with an ex-gratia $60,000 payment if more than half opted to quit.

This trigger point was revised recently to 30 per cent.

When over half the retailers at Sunset Way’s Block 106 quit two years ago, the remaining business faltered as crowds thinned out.

Under the scheme, HDB converts the empty shops into spaces for communal uses.

But Sunset Way’s potential was too good to ignore.

Shopkeepers began talks with HDB and the ward’s MP, Mr Christopher de Souza, to save the centre.Outlets that have seized the opportunity include steak house Grill-Out, a cafe specialising in New Zealand wine and food, and a bistro, peaberry & pretzel.

Even Rocky’s Pizza is back. It was synonymous with the area for 15 years before it was edged out by a new condo. Owner Daniel Cooley decided to return as soon as he learnt of a vacancy.

Resident Madam Celestine Yuan, 35, is pleased. ‘Now I don’t have to go far to get a unique, casual yet sophisticated dining experience.’

Mr de Souza said Sunset Way paves the way for more HDB estates to revamp themselves. ‘This involves very careful consideration of the area’s trade mix and different ways to attract crowds.’

He has been invited to officially open the revamped centre next month. Shopkeepers will soon launch a marketing campaign to raise its profile.

‘Now I don’t have to go far to get a unique, casual yet sophisticated dining experience.’

MADAM YUAN, a resident of Sunset Way

‘Business is already booming, and hardly anyone knows about us yet.’ MR COOLEY, owner of Rocky’s Pizza

Source : Straits Times – 30 Aug 2007

Marina Bay IR to cost more than the US$2.4b Venetian Macao

GAMING and resorts operator Las Vegas Sands’ newly opened US$2.4 billion Venetian Macao in the Chinese territory may be the biggest single structure in Asia, and it may be the second biggest building in the world.
 
But its Marina Bay Sands (MBS) integrated resort in Singapore will be more expensive – especially now that costs could escalate by as much as 40 per cent to hit some S$5.2 billion, or about US$3.4 billion.
 
Speaking at a press conference here yesterday at the official opening of the Venetian Macao, Las Vegas Sands COO William Weid-ner said that it had been ’struggling to stay on budget’, but rising construction costs coupled with the refinement of design on the complicated curving structure of the hotel towers is likely to push up the overall cost of the Singapore project by between 20 and 40 per cent.
 
Sands beat three other bidders in a hard-fought campaign last year to clinch the licence for the Marina Bay integrated resort. The cost of MBS had previously been estimated at S$5.05 billion including S$1.3 billion for the land. Taking away the land value and factoring in a 40 per cent rise in project cost, the Marina Bay resort could come to about S$5.2 billion.
 
Mr Weidner was nevertheless optimistic about the opening date of the Singapore project. ‘If we keep our noses to the ground, we can open in late 2009,’ he said.
 
So far, Sands says it has awarded S$700 million in construction contracts for the Singapore project. A S$1 billion contract will soon be awarded to build the hotels.
 
Mr Weidner said that Sands was in discussions with the Singapore government on construction costs but did not disclose details. ‘The government knows where we stand,’ he said.
 
Unlike most casino business models, Sands will also depend on the meetings, incentives, conventions and exhibitions (Mice) business.
 
Giving an update, Mr Weidner said it has currently 20 major events booked at MBS up to the year 2013. For the Venetian Macao, 44 major events have been booked for the next two years, with the largest expected to attract 30,000 visitors.
 
But Mr Weidner does not expect the North Asia market to eat into the South Asia market. He added: ‘When they see what is available (at the Venetian Macao), it will be much easier to sell Singapore.’
 
Selling Macau as more than just a casino destination has not been tested in the Chinese territory but Sands hopes to attract visitors to extend their stay with attractions that include a 15,000-seat arena, a US$150 million Cirque du Soleil show and a one million sq ft mall with 350 shops.
 
The number of visitors to Macau has been increasing; up to 26 million people are estimated to visit the territory this year.
 
Indeed, demand for travel to Macau has become so intense that the Chinese government decided to place some travel restrictions on its nationals earlier this year.
 
Macau has benefited from a surge in mass market players from China and, interestingly, Sands’ first casino in Macau – the smaller Sands Macao – was targeted largely at this market. It was so successful that it recouped its investment within a year. 
 
The much more expensive Venetian Macao will be targeted at the leisure and Mice segment. Although Mr Weidner would not say when it would break even, he said it expects a yield of over 20 per cent per year on its investment. He added that Sands could sell some of its assets, including the mall.
 
Sands will also be looking to grow its premium-play segment which currently makes up 60 per cent of its gaming revenue.
 
Another strategy is to expand within Asia.
 
Also speaking at the press conference, Sands CEO and chairman Sheldon Adelson said that it would open other integrated resorts in Asia if allowed. But he added: ‘This is not a race.’
 
Noting that China alone hosted 60 million Mice delegates in 2003, Mr Adelson said, ‘There are only so many events you can hold in one building.’
 
Source : Business Times – 29 Aug 2007

Inflation expected to be 1-2% in ‘07: Hng Kiang

DESPITE soaring property prices and good wage increases, inflation is expected to come in at between one and 2 per cent this year, Minister for Trade and Industry Lim Hng Kiang said yesterday in response to parliamentary questions on the Singapore economy.

While this expected inflation rate is an increase from the average annual rate of one per cent for the past three years, Mr Lim said that inflation is ’still very reasonable’ seeing that Singapore has been enjoying practically 16 quarters of growth.

‘The current cost pressures are reflective of our competitiveness and resultant strong economic growth,’ Mr Lim said, noting that the economy is projected to grow by 7 or 8 per cent this year. The growth has been apparent in both the manufacturing and services sectors. Overall unit labour cost increased by 5.8 per cent year-on-year in the first half of 2007 while unit business cost for manufacturing increased by 2.6 per cent.

Mr Lim also pointed out that the government had taken steps to combat immediate space constraints by introducing a supply of interim office space, along with HDB flats for rent. The ministry of national development has also published additional information on property prices and rents to keep the public and businesses better informed. More than 42,000 private residential units and 640,000 square metres of office space will be available by 2010, to help meet demand.

With regards to manpower, the minister explained that the government is planning to help more Singaporeans – like women and older workers – rejoin the workforce so as to benefit from the robust employment market. ‘Our focus is to create better jobs for Singaporeans and better opportunities to attract global talent,’ he said.

Mr Lim cited Singapore’s ranking this May by the World Competitiveness Yearbook as the second-most competitive economy overall among 55 countries, as showing that Singapore remains an attractive destination for investors, talent and tourists, even in the face of increased costs.

Source : Business Times – 28 Aug 2007

Rents, wages up but S’pore cheaper than HK, Tokyo

EVEN though property costs and wages are on the rise, Singapore remains cheaper than global cities in the region such as Hong Kong and Tokyo, said Trade and Industry Minister Lim Hng Kiang.

Nevertheless, the Republic cannot afford to be complacent, said Mr Lim. ‘We have to maintain vigilance over our costs, as excessive cost increases will dampen our growth prospects,’ he said.

Mr Lim was speaking in Parliament yesterday in response to MPs’ concerns about the impact of rising business costs on Singapore’s economic competitiveness.

In response to questions on this issue from Mr Liang Eng Hwa (Holland-Bukit Timah GRC), Mrs Josephine Teo (Bishan-Toa Payoh GRC), Dr Muhammad Faishal Ibrahim (Marine Parade GRC) and Madam Halimah Yacob (Jurong GRC), he laid out proactive steps that the Government has taken to address supply constraints.

Also, citing as examples London and New York, which are thriving hubs despite their high costs, Mr Lim said ‘competitiveness is more than offering low costs alone’, but also about value creation. In this respect, Singapore has attributes that economies in the region cannot easily replicate, such as its livability.

Also Mr Lim pointed out that in the past three years, the consumer price index has increased at an annual rate of 1 per cent, while overall unit labour cost actually declined at an annual average rate of 2.2 per cent. ‘However, in recent quarters, we have seen increases in property prices and rentals, as well as wages,’ he noted.

He cited recent moves to release land for temporary office space as well as provide more public flats for rental.

The Ministry of National Development (MND) also released additional information on property prices and rents ‘to allow the public and businesses to make more informed decisions on property purchases and rentals’.

And the MND has been putting out an ample supply of land with more than 42,000 private residential units and 640,000 sq m of office space to be completed by 2010.

The Government is also looking at ways to help more Singaporeans such as older workers and women take advantage of the strong employment market and rejoin the workforce.

Despite media reports of ’sky-high’ office rentals, Mr Lim said although the median prime office rent in the second quarter was $9.50 per sq ft per month, the median rent in other locations, accounting for about 80 per cent of office space here, was less than half of that.

Mr Lim also quoted studies which showed that Singapore remains cheaper than other global cities in the region.

A survey on global office market rentals by consultants CB Richard Ellis showed that Singapore was 30 per cent cheaper than Hong Kong, and 50 to 60 per cent cheaper than Tokyo.

Source : Straits Times – 28 Aug 2007

Property, financial boom drives growth in services

SINGAPORE’S services sector racked up a robust second quarter, thanks to the booming property and financial sectors.

Overall business receipts for the three months ended June 30 were up 15.6 per cent over the same period last year, according to the Department of Statistics.

Financial services, real estate and business services were among the sectors that enjoyed bumper growth but economists were not optimistic that such robust expansion will be sustainable.

Fortis Bank strategist Joseph Tan said: ‘The main question is how the sub-prime activity in the United States will affect the market. If it is risk-averse, we will be negatively affected if trading volume falls.’

Financial services led the way with a 35.6 per cent rise in turnover, thanks mainly to brisk business in banks, stock brokers, funds managers and investment advisors.

The related field of insurance rose 28.2 per cent. If the financial and insurance sector figures were stripped out of the overall picture, services industry growth in Singapore was still 10.5 per cent.

United Overseas Bank economist Alvin Liew believes, however, that those two sectors are still key to further strong expansion. ‘Growth without financial services remains rather strong, but because financial services registered strong growth, if it slows, the overall robust growth seen here might not be sustainable.’

Real estate, excluding developers, grew by 27.2 per cent, which, in turn, came on the back of robust 19.2 per cent first-quarter growth.

The bumper figures stemmed from the dramatic recovery in the housing market but experts are divided over whether the good times will roll for much longer.

Mr Liew feels real estate ‘can be expected to do well over the next 12 to 18 months’, while Mr Tan believes demand could dry up.

‘A lot of the positive vibes in the property markets have been driven by gains in the equity markets,’ he said.

‘If activity in the markets slow down, real estate activity could slow down too.

‘But there are two trends in the sector. Fundamental demographic demand, such as with the integrated resorts and inflow of migrants, will continue to drive demand over time. But cyclically, we can expect retardation of demand as speculative buying and positive sentiments slow.’

Leasing services, a related field, also enjoyed a good quarter, with receipts up 12.7 per cent, thanks mainly to more business for firms leasing land and water transport gear.

Education services were up 15.9 per cent while business services rose 15.6 per cent. This sector covers fields such as legal and architecture but it was the 36.8 per cent surge in market research and management consultancy firms that really gave the sector a boost.

Transport saw growth across all sectors reflecting the higher returns from freight as regional trade boomed. Receipts in storage and supporting services rose 12.4 per cent.

Economists expect the services sector to grow fairly strongly for the rest of this year and into 2008.

Source : Straits Times – 28 Aug 2007

MTI sees growth at upper end of 4-6%

The economy should be able to grow at the upper end of the newly revised 4-6 per cent trend potential over the next five years if external conditions remain good, says the Ministry of Trade and Industry (MTI).

Thanks to diversification and reforms, the economy now has the potential to grow 4-6 per cent over the next 5-10 years, MTI says, elaborating on what Prime Minister Lee Hsien Loong said towards the end of his National Day Rally speech on Sunday.

Mr Lee revealed that after a review, MTI had raised its estimate of Singapore’s underlying growth from the previous 3-5 per cent range.

But the new estimate is still well below the private sector’s assessment. As BT reported last month, most economists believe Singapore’s trend growth potential has risen to 6-8 per cent, fuelled by an influx of skills and investments.

Economic growth has averaged 7.8 per cent a year in the past three years and 6.1 per cent a year in the past five years, which MTI attributes to economic reforms.

In 2003, the Economic Review Committee projected that labour force growth of 1-2 per cent and productivity increases of 2-3 per cent would drive annual economic growth of 3-5 per cent over the medium term.

But MTI now sees higher increases. It believes the labour force can grow 1.5-2.5 per cent a year, with more women, older workers and expatriate talent in the workforce.

Productivity growth is also projected at a higher 2.5-3.5 per cent because the economy has diversified into higher value-added sectors and attracted new capital investments.

‘Economic restructuring in an increasingly competitive environment has also helped enhance efficiency,’ MTI says. ‘New high-growth sectors like biomedical manufacturing and wealth management and rejuvenated traditional sectors like marine engineering and tourism have also made the economy more resilient and less vulnerable to sector-specific shocks.’

According to MTI, the external environment is likely to be favourable over the next five years, ‘increasing the likelihood that Singapore’s growth potential is realised’.

Apart from the key sources of demand in the United States, the European Union and Japan, the rise of China and India and the revitalised South-east Asian countries will boost growth.

From the late 1980s to the early 1990s, Singapore’s medium-term sustainable growth was seen at 5-7 per cent. This was later pared, officially, to 4-6 per cent as the economy ‘matured’ and subsequently to 3-5 per cent.

Private sector estimates were usually several percentage points higher.

Source : Business Times – 21 Aug 2007

Economic reforms over last 5 years have boosted growth: MTI

Singapore’s economy has the potential to grow by 4 to 6 percent annually over the next 5 to 10 years, says the Trade and Industry Ministry.

Giving this upbeat assessment a day after Prime Minister Lee Hsien Loong spoke of the country’s vibrant growth, the Ministry says this reflected the effects of economic reforms over the last 5 years.

These reforms enabled actual growth to average 6.1 percent per annum, exceeding the 3 to 5 per cent estimated by the Economic Review Committee (ERC) in February 2003.

The new growth potential estimate is based on labour force growth of 1.5 to 2.5 per cent and productivity increase of 2.5 to 3.5 per cent.

This is higher than the ERC’s projected labour force growth of 1 to 2 per cent and productivity increase of 2 to 3 per cent.

The Ministry says economic restructuring in an increasingly competitive environment also helped enhance efficiency.

New high growth sectors like biomedical manufacturing and wealth management, and rejuvenated traditional sectors like marine engineering and tourism also made the economy more resilient to sector-specific shocks.

Healthy economic conditions also helped increase the labour force participation rates of women and older workers.

Meanwhile, the external environment over the next five years is expected to be favourable, increasing the likelihood that Singapore’s growth potential is realised.

While the US, EU and Japan will continue to be important external drivers of demand, the rise of China and India will provide additional boost to growth.

In addition, the Southeast Asian countries have recovered from the Asian financial crisis and are returning to a path of growth and stability.

And if external conditions remained favourable, MTI believes Singapore should be able to achieve a growth rate at the upper end of the 4 to 6 per cent range over the next 5 years. – CNA/ch

Source : Channel NewsAsia – 21 Aug 2007

Economic growth still intact despite market jitters: PM Lee

DESPITE the recent market jitters that may affect Asia in the short term, Singapore’s underlying growth potential in the long run stays intact in the 4-6 per cent range, said Prime Minister Lee Hsien Loong yesterday.

‘After Sars, we estimated Singapore’s sustainable growth at 3-5 per cent,’ Mr Lee revealed at the close of his National Day Rally speech. ‘We were a little bit conservative but we thought it was realistic.

‘In the light of the last few years, MTI (Ministry of Trade and Industry) has reviewed these numbers and we’ve concluded that we should go for a higher target. So we are raising our growth estimate to 4-6 per cent for the next five to 10 years.’

Despite the upward revision, the official growth trend forecast still falls behind estimates by private sector economists. With contributions from labour, capital and productivity, they have estimated Singapore’s growth trend to be at a near-8 per cent pace, according to a BT report last month.

Mr Lee, however, views the 4-6 per cent long-term growth as an ambitious feat. ‘At our stage of development for Singapore, this is a very ambitious target,’ he said. ‘Very few countries have done it, maybe Japan until it ran into problems in the 1990s but not the European countries, not even America.

‘But I think we can do it provided we continue to adapt, stay open, remain competitive and ride the wave. Then we will grow, with the whole of Asia and not just based on what we have on this little island in Singapore, physically here.’

Commenting for the first time on the market turbulence triggered by the US sub-prime woes, Mr Lee said that the situation may affect Asia over the next three to six months. ‘But even if it does, the fundamentals in Asia remain strong and so too for Singapore,’ he added.

Even with the positive outlook, he urged Singaporeans to strive to do better than the revised estimate. After all, the environment looks favourable for the next few years. The economy is more vibrant and competitive, relations with neighbours are good, and Singaporeans as well as Singapore companies are going all over the world.

Singapore’s economy grew 7.6 per cent in the first six months of this year, riding on a better-than-expected 8.6 per cent second quarter growth.

Source : Business Times – 20 Aug 2007

CPF stretched to provide cover for ageing population

The guaranteed interest rate under the CPF scheme will rise by one percentage point for amounts up to $60,000, in an effort by the government to make retirement savings last longer.

In addition, the age at which drawdowns on the Minimum Sum can begin will be raised progressively so that the savings can stretch further.

The government will also legislate the re-employment of workers, to take effect from 2012. Initially companies will be required to re-employ workers up to age 65, and later up to 67.

For the CPF scheme, some form of annuity will be made compulsory for those below 50, said Prime Minister Lee Hsien Loong yesterday at his National Day rally speech.

Mr Lee said the CPF Board will pay one percentage point more on the first $20,000 of Ordinary Account balances, and on up to $60,000 on a member’s combined accounts comprising the OA, Special, Medical and Retirement Accounts.

Mr Lee said: ‘I think we must improve the returns on the CPF. And I think our main focus is to help the lower and middle income groups.’ Half of active CPF accounts have less than $45,000. These are members who are working and contributing to their accounts.

With $45,000, Mr Lee said: ‘… you are not poor but I would not think it is wise to strongly encourage you to go and play the stock market. Why? First, you don’t have enough savings. Secondly, you may not have the expertise. Thirdly, you should not expose yourself to excessive risks…’

The CPF Board will be taking the route of enhancing the existing risk-free framework. More than half of the active members will get one per cent more on all their balances.

The $60,000 of funds can still be used for housing and medical expenses. But it cannot be invested through the CPF Investment Scheme.

This is expected to cheer the majority of members, who appear to prefer the safety of the guarantee. Private sector investment fund managers and insurers, however, may be disappointed as a higher guaranteed rate raises the risk-free bar which their funds have to beat, even if it applies only to up to $60,000 of funds.

Investor education efforts to date have set out to encourage individuals to step out of the comfort zone of a guaranteed rate.

The concern has been that a relatively low guaranteed rate of 2.5 per cent may not keep pace with inflation or cover the risk of a shortfall in funds.

As at March 31 this year, a total of $25.9 billion OA funds, and $5.7 billion of SA funds were invested in a mixture of stocks, funds and insurance policies. There is still another $57 billion of OA funds and $23.8 billion of SA funds that are uninvested.

For amounts in excess of $60,000, members are still free to invest through CPFIS.

Mr Lee said a percentage point more in the annual interest rate will make a big difference. A young man who starts work at 21 earning $1,700 a month, and buys a four-room HDB flat, will earn about $20,000 more in interest by the age of 55.

The hike will cost the government $700 million initially. The cost will rise as members save more in the CPF. The cost, said Mr Lee, is equal to the entire government grant to the HDB every year of $750 million.

There will be no change to the concessionary HDB loan rate formula.

On drawdowns, members are currently required to set aside the Minimum Sum at the age of 55. This is drawn upon from the age of 62 in monthly payments. But if the account is drawn upon too early, a retiree may outlive his savings. Based on the current scheme earning 4 per cent in interest, the annual income from the Minimum Sum lasts 20 years, after which the account is depleted.

Deferring the drawdown by a year will earn the account more interest, and make it last two more years till 82. But more people will live past 82, in particular women, said Mr Lee.

As the government legislates re-employment until 65, the drawdown age must be raised progressively as well.

In 2012, the year when re-employment of workers will be required, the drawdown will begin to rise, and will reach 65 by 2018. Members who are currently 58 or older will not be affected. For those 53 and younger, the drawdown age will go up to 65.

Mr Lee said the move may not be popular. ‘But we have no choice. People are living longer, we have to work longer, and we’ve got to start drawing on the reserves later. Therefore we have to start moving now.’

For older workers in their 50s who are affected by a later drawdown age, a one-off bonus interest will be paid to their Retirement Accounts. A bonus will also be paid to those who voluntarily defer their drawdowns, even if they are currently 58 and older.

Annuities are a solution to the need for an income in retirement, said Mr Lee. But few people opt to convert the Minimum Sum into an annuity as Singaporeans do not understand annuities.

Source : Business Times – 20 Aug 2007