It has been a good year for Spore last year (Yr 2007) as the economy has fired up in all cylinders for Q1 , Q2 & Q3 ‘07. However, the Overall GDP has declined tremendously in Q4 ‘07 due to a growing pessimism about the US economy. Even the Federal reserve interest rate cuts could not diminish the impact of the subprime housing mortgage crisis. As a result, (multiplier effect) it has weaken the U.S currency and give rise to a higher oil price which led to a 25 years high Inflation in Spore. Things are getting more expensive in which affected the domestic consumer’s market.
Many of us may start to guess is Asia could whether a possible recession in U.S. According Senior Minister Lee Kuan Yew in INSEAD Leadership Summit, he mentioned that the great tectonic plates have shifted in the region and in 20 years, there will be a very different Asia and a set of Asian economic powers. With the rise of China and India in the recent years, it serve as a backbone for Asia to excel even in the bad times. However, we can’t deny that Asia’s growth cycle is not dependent on consumers outside the region, particular U.S. Therefore, the slow down in the U.S economy would definitely affect the export sector in Asia. China has played a major role in absorbing the shock of U.S economic slow down and we have definitely benefit from the spill over basing on how the city state’s economy has performed in 2007.
Many of us might be wondering, how well has Spore position itself during the bad times? Breaking down the sectors, offshore and marine have posted strong growth brought on by the increased number of oil rig projects since 2003.
Private banks have also did very well recently, with many international banks expanding in the country. An after effect perhaps of the increasing no of affluent individuals who favour Spore as an investment site for wealth management and capital infusion. According to a study by Boston consulting group, it indicated that Spore based private banks will have to triple the no of relationship managers to personal advisors from 2k to 6k in the next 5 years to meet demand for private and priority banking services.
Property sector also saw an impressive growth with a rise in the high end luxury living that also trickled down to the mass market. The foreign-led property boom has been largely due to S’pore’s attractiveness as a wealth management hub. This has led to an increasing number of foreigners in the wealth management sector relocating to ply their trade here, thus driving the demand for high-end properties.
Construction projects have also increased from 10 bllion in 2004 to 20 billion this year. There is the MRT circle line, the Formula One race track and the makeover at the orchard and somerset area to flourish the Spore Town area so as to boost tourism.
Growth in the construction industry has also spilled over to the financial and business services, which showed an increased number of loans extended to the building and construction industry. Housing loans have also increased tremendously.
Because of the surge in Oil prices, agricultural commodities like soybean and palm oil have also seen a rally and analysts are betting on companies involved in the production of these goods to do well this year.
Tourism and hospitality is one of the main industry that Spore should focus more on as we not only need to attract more tourists to our shore, we also need to expand our domestic consumer’s market so as to remain competitive and lessen our reliance in external market. With the upcoming F1 race in Sept, the Integrated resorts which are coming in 2008, the new built Spore flyer which is operating currently and also the re-development of the Orchard town area, it is expected to boost revenues in the hospitality and related business.
Personally. these are the industries which i felt will less likely be affected if the U.S goes into a recession.
However, manufacturing sector will be hit this time round as the sub prime crisis in the US which have potential losses projected to reach $300 to 400 billion, which is more than $50 to $100 billion previously forecasted. This will cause a contagion effect in the housing market and will hit banking and retail, which may affect Asia where most manufacturing companies are located.
Nevertheless, whether or not, the US went into a recession, does not spell the end of the world for Asia. All it means is that Asia has not repudiated the laws of the business cycle.
