Question No. 740 of Notice paper No. 59 of 2011

Question No. 734 of notice Paper No. 57 of 2011

Question No. 743 of Notice paper No. 60 of 2011

 

Name and Constituency of Member of Parliament

Mdm Halimah Yacob, Member for Jurong GRC

Mr Teo Siong Seng, Nominated Member

Mdm Ho Geok Choo, Member for West Coast GRC

 

Questions

*740. Mdm Halimah Yacob: To ask the Minister for Trade and Industry if he will provide an assessment on the impact of the recent earthquake and tsunami in Japan and the conflicts in the Middle East and North Africa on our economy.

*734. Mr Teo Siong Seng: To ask the Minister for Trade and Industry whether his Ministry will provide an assessment on the impact of the political turbulence in the Middle East and North Africa and the Japanese nuclear catastrophe on Singapore's economic outlook.

*743. Mdm Ho Geok Choo: To ask the Minister for Trade and Industry in view of the current global developments like the nuclear crisis in Japan and unrest in North Africa and the Middle East (a) what is Singapore's projected economic growth for 2011; and (b) how will these developments affect our pace of inflation.

 

Answer

Mr Speaker, Sir, the situations in Japan and the Middle East and North Africa remain fluid, with a great deal of uncertainty. However, let me give my Ministry’s preliminary views based on current state of events.

Japan, as we all know, is the world’s third largest economy, accounting for around 5 per cent of global trade and 9 per cent of world output. It is one of Singapore’s key trading partners, accounting for around 6 per cent of our total trade with the world. As such, the recent developments in Japan will inevitably be of concern to the rest of the world, including Singapore. The immediate source of concern lies in the impact of the on-going nuclear emergency and power outages on Japan’s industrial activities. As Japan is an integral part of the regional supply chain, particularly in the electronics and automobiles sectors, the near term output loss in the economy could have some spill-over effects on manufacturing and trade activities in the rest of the region.

Much will depend on how prolonged the disruption to industrial activities in Japan will be. At this juncture, we do not expect significant impact on our supply chain. Less than 10 per cent of our electronics imports – mainly components and parts – are from Japan. Feed back from our precision engineering firms also suggests that they have sufficient inventory buffers to tide over any supply disruptions for a few months. If Japan can resolve its nuclear power plant problems and factory production resumes in the near term, any negative impact on the supply chain will likely be transitory.

The events in Japan could also have some implications for our services industries. Japan accounted for around 5 per cent of the total number of visitor arrivals to Singapore in 2010. A slowdown in tourism flows from Japan would thus affect our tourism-related industries. However, our preliminary assessment is that the impact is not expected to be significant at this juncture. 

Let me now turn to the political unrests in the Middle East and North Africa, which have led to higher volatility in global crude oil prices. Crude oil prices, for example, UK Brent, have risen from around US$100 per barrel at the end of last year to US$120 per barrel recently. Higher oil prices will lead to an increase in business cost. Certain sectors such as our transport and chemicals sectors will be more affected. It could also affect consumer sentiments and lower private consumption. Higher oil prices could also dampen global economic growth, and affect us indirectly.

At this juncture, the unrest in the Middle East and North Africa has not significantly affected global oil supply as the worst-affected countries such as Libya and Bahrain are not key exporters of oil. Moreover, some members of the Organization of the Petroleum Exporting Countries (OPEC) such as Saudi Arabia have made commitments to increase oil production to cope with any supply disruptions in the region. As such, although the recent increase in oil prices is likely to have affected global economic activities to some extent, the impact has been small.

Bring any further deterioration in events in Japan and the Middle East and North Africa region, Singapore’s economic outlook remains positive. Early indicators of industrial production and exports point to growth continuing at a healthy pace. There are also signs that the recovery in the advanced economies is gaining momentum, as indicated by recent improvements in the US job market.

Growth for the year is expected to be in the range of 4.0 to 6.0 per cent, unchanged from the forecast announced in February this year. 

Mdm Ho Geok Choo has also asked about the impact on inflation. Assuming no further escalation in global oil prices, we expect the full-year headline CPI inflation to stay within the current forecast range of 3.0 to 4.0 per cent. This means that CPI inflation, which rose by 5.2 per cent on a year-on-year basis in the first two months of 2011, is expected to moderate from now on.

The Government will continue to closely monitor these external developments and the potential impacts on our economy.