Unlike China, India, Japan or Australia, Singapore's economy looks as though it has lost a bit of puff in recent months, judging from figures released yesterday.
Singapore's economy grew at an annualised, seasonally adjusted rate of 4.3% in the third quarter, well below market expectations of a rate around 6.4%, thanks to a series of government measures to cool the economy and the impact of the subprime crisis in the US which has affected the country's small banking sector.
But Singapore's Trade Ministry lifted its 2008 forecast a fraction to 4.5%-6.5% which is better than its range of 4%-6% growth, while the forecast range for this year narrowed to 7.5%-8% from 7%-8% in earlier forecasts.
Worryingly, the inflation genie seems to be out of the bottle in Singapore like here in Australia and in China.
The Trade Ministry forecast inflation to rise to as much as 4.5% next year from an average 2% this year. That would put Singapore much higher than us, even with our inflation rate expected to rise to more than 3% early next year, according to the Reserve Bank.
Singapore's inflationary pressures are rising as the economy expands, forcing the Monetary Authority of Singapore to say that it will allow a faster appreciation for the Singapore dollar.
It said yesterday that the currency band, which will be reviewed next April, remains "appropriate''. The Singapore dollar has gained 5.8% so far this year against the greenback, while the free floating Australian dollar has risen by more than double that.
Financial services and property development provided much of the growth in the third quarter.
Renewal of housing units and rebuilding and knock down and building of new office blocks is a growth industry.
The Singapore Government is trying to make the country into centre for hedge funds and banks and that has driven the rising demand for office space and new towers.
Despite the boosting of financial services, the country's banks have been hit by the subprime crisis. The DBS Bank lost a CEO and had write-downs of investments in credit securities associated with subprime loans.
The annualized 4.3% growth rate in the third quarter followed a revised 14.5% gain in the second quarter. Compared to a year earlier, the economy expanded 8.9% after gaining 8.7% in the previous three months. That was lower than initial estimates.
Services rose 8.3% in the quarter from a year earlier, while the construction industry grew 17.7% in the same period, thanks to the spending on new office space and residential towers.
That is not a well supported basis for growth as commercial and residential building in the US, Britain, parts of Europe and some of Australia (for housing) has not been as strong as business investment in new plant and equipment.
To try and slow the property boom the Government has been forced to withdraw a long time plan that allowed deferred payments on homes to cool the private residential market.
It says it will postpone S$2 billion of public projects to ease building demand and costs, a sure sign of concern at how growth is becoming unbalanced.
Manufacturing, long a favourite of Government policy, has been held back by falling electronics exports which are at the worst slump in five years.
The computer chip sector is facing intense pricing pressure and margin compression.
The Trade Ministry said that manufacturing grew 10.5% in the September quarter, still impressive but down from an initial estimate of more than 12%.
A slowdown in the US would have more serious consequences for Singapore than for China, Hong Kong or Japan.
