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Monday, 31 October 2011

Dark clouds on horizon despite EU deal: PM; He warns of slower growth as economy matures, population growth slows

Teh Shi Ning; In Perth


PRIME Minister Lee Hsien Loong says 'there are dark clouds on the global economic horizon', despite the great relief that a long-awaited eurozone rescue deal brought to markets late last week. And back home, the 'price to pay' of managing Singapore's population by constricting foreign worker inflow, coupled with a maturing economy, will mean that growth of 3 or 4 per cent a year ought to be considered 'not a bad year', he said.

Speaking to Singapore media on the sidelines of the Commonwealth Heads of Government Meeting (CHOGM) in Perth yesterday, Mr Lee said the Monetary Authority of Singapore's prognosis last week of stalled growth over the next few quarters, was 'not surprising'.

MAS had said that 2012 growth may fall below the economy's potential of 3-5 per cent, before recovering again towards the end of next year. It is an 'optimistic' view, Mr Lee said. Even if things do improve by then, he thinks the longer-term problems in Europe are unlikely to 'disappear next year' and expects 'several years of difficulty in the economy', which Singapore must be prepared for.

Describing last week's rescue deal - to write down the value of Greek government debt held by banks and other private investors by half and boosting the eurozone's bailout fund to around one trillion euros (S$1.76 trillion) - as a 'temporary solution' that 'hasn't made the problem go away by any means', Mr Lee said it must first be implemented to be proven effective.

There are concerns over whether the bailout fund is large enough, and longer-term structural issues such as fundamental differences in productivity, fiscal balance and inflation tolerance remain. Closer political ties and a more cohesive Europe is the way forward, but is unlikely to be achieved any time soon too, Mr Lee said. 'It depends on countries feeling for one another, but for the Germans to feel for the Greeks, never mind like the Greeks, and vice-versa, I think that's a work of many, many years.'

These 'dark clouds on the horizon' and the possibility that world economies are headed for a second dip in the medium term, have already slowed demand and hit Singapore, Mr Lee said.

Reiterating that higher growth rates of 5-7 per cent of previous years can no longer be expected in future, Mr Lee said 3-4 per cent should be deemed 'not bad' in the economy's new phase of growth.

'It's a different phase. When you're an adolescent, you grow and shoot up inches every year, but when you mature you hope to grow, not necessarily taller, but wiser and better. We have to make that change of gear,' he said.

Acknowledging that moves to limit the inflow of foreign labour via stricter criteria and higher levies have been painful for employers, many of whom are small and medium enterprises, Mr Lee said Singapore faces 'some very difficult choices'.

'It's not as if, if you sent away all the foreign workers or kept out all the foreign workers, then we'd live in paradise. There is a price, and it's quite a high price to pay. As we try to manage the population in Singapore, we're going to also have to accept a lower growth rate,' he said.

Singapore politics, too, has entered a new phase. Giving his take on the first sitting of the new 12th parliament, which closed just over a week ago, Mr Lee noted 'a lot of excitement and interest' over what the newly elected Members of Parliament (MPs) had to say.

Opposition MPs 'put a lot of effort into their speeches' but it remains to be seen if they will 'participate in helping to solve problems', Mr Lee said. Parliament is 'not just a show, it's not just theatre', rather, it is 'a place where we should have serious discussion and we should discuss, not just criticise'.

Referring to several occasions on which opposition MPs floated criticism of the government as 'what people say', Mr Lee said the responsibility of an MP is not merely to repeat others' views but to have their own views and 'express them fearlessly'.

'To dare to challenge a government doesn't take courage because the government is not the emperor - it cannot chop your head off. But to dare to stand up and say something which is true but may be difficult, spiky issues which the population may not wish to hear, that takes courage, because the population has votes,' he said.

The government's responsibility is to 'speak the truth to Singaporeans' and the opposition's is to 'acknowledge the truth and speak it, whether or not it's politically advantageous to them', Mr Lee said.

Mr Lee: 3-4 per cent should be deemed 'not bad' in the economy's new phase of growth

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