Singapore said its economy will expand a record 15 percent this year, the fastest pace in Asia, even as slowing global growth threatens to damp export demand. The island’s currency rose. Gross domestic product will grow 4 percent to 6 percent in 2011, the trade ministry said in a statement. The economy, vulnerable to swings in demand for its drugs and electronics, shrank less than previously estimated in the third quarter. The nation, which has had three recessions in the past decade, won’t experience one this year, the government said today. The expansion has fueled inflation and prompted the central bank to allow faster currency gains even as neighbors Malaysia and Thailand refrained from tightening policy this quarter. While the global economy is “vulnerable” to risks of a slump in the U.S. and a sovereign-debt crisis in Europe, Asian demand will drive the region’s growth in 2011, Singapore’s trade ministry said. “It’s clear that Singapore remains fairly upbeat on growth and it seems the concerns are more on the inflation front,” said Selena Ling, head of treasury research at Oversea-Chinese Banking Corp. in Singapore. “The question is how long we expect Singapore and the rest of Asia to chug along notwithstanding the slowdown in the developed economies.” The island’s currency has gained about 8 percent against the U.S. dollar this year, and closed at a record S$1.2835 on Nov. 4. It rose as much as 0.3 percent to S$1.2987 a dollar before trading at S$1.3005 as of 10:48 a.m. local time. Currency Appreciation The Monetary Authority of Singapore said last month it will steepen and widen the currency’s trading band while continuing to seek a “modest and gradual appreciation.” Singapore uses its currency rather than a benchmark interest rate as its main tool to manage inflation. “The MAS will have to stay tight, given rosy growth projections and intensifying inflation pressures,” said Chua Hak Bin, a director of global research at Bank of America Merrill Lynch in Singapore. “We think the risk is for further tightening” at the next policy review in April, he said today. Singapore’s GDP shrank at an annualized rate of 18.7 percent in the third quarter from the previous three months, less than the 19.8 percent pace initially estimated last month, the trade ministry said. The Southeast Asian nation’s economy grew 10.6 percent in the third quarter from a year earlier. The island’s 15 percent forecast growth rate this year would be the fastest in the world after Qatar’s, according to International Monetary Fund estimates. Europe, U.S. Risk Asian economies have led a global recovery that’s been restrained by subdued expansions in Europe and the U.S., where the jobless rate remains above 9 percent. While the Bank of Korea increased interest rates for the second time in 2010 this week after inflation surged past the central bank’s ceiling, joining India and Australia in extending monetary tightening, others have paused. Malaysia’s central bank last week left borrowing costs unchanged for a second meeting, and Thailand last month refrained from a third straight increase. Policy makers in the Philippines to Indonesia have avoided raising rates at all this year, in part to avoid offering a greater lure to inflows of speculative capital. Singapore hasn’t had to take “extraordinary measures” against liquidity inflows, central bank Deputy Managing Director Ong Chong Tee said today. Concerns that capital flows to emerging markets are surging have been overstated and banks are “intermediating” the capital movements, though authorities are keeping a “close eye” on inflows, Ravi Menon, permanent secretary at the trade ministry, said at a briefing today. Trade Dependence Prime Minister Lee Hsien Loong has said the Singapore economy cannot maintain this year’s pace of expansion. The island’s dependence on overseas trade, with non-oil exports equivalent to more than half of GDP, makes it vulnerable to swings in global growth. Non-oil shipments may rise between 23 percent and 24 percent in 2010 and as much as 8 percent next year, the government said today. Exporters are able to maintain their competitiveness even as the Singapore dollar climbs because regional currencies are also appreciating, Ong said. The IMF last month lowered its 2011 forecast for global growth, citing high unemployment, public debt and fragile banking systems as risks. Ireland’s government is under increasing pressure to tap the European Union’s emergency fund as it struggles to cut its budget deficit and investors grow concerned about the state of the country’s banks. Irish Risk EU and IMF officials will start scanning the books of Ireland’s debt-laden banks today in Dublin in a prelude to a possible aid package to stem Europe’s widening fiscal crisis. “The global economy remains vulnerable to several downside risks, notably a reversion to recessionary conditions in the U.S., and concerns of sovereign debt sustainability in the peripheral EU economies,” the Singapore trade ministry said. The government said it expects a “modest sequential upturn” in the fourth quarter, helped by financial services and pharmaceuticals. The economy will avoid a 2010 technical recession, defined as two consecutive quarters of GDP contraction, Menon said. Asian demand will drive the region’s growth next year, and China will be a “pillar of support” for regional economies, Menon said. Manufacturing Capacity Manufacturing, which accounts for about a quarter of Singapore’s economy, climbed 14.3 percent from a year earlier in the three months through September, after surging 46.1 percent in the second quarter. The construction industry gained 7.1 percent, while services grew 10.1 percent. The city’s two casino resorts run by Genting Singapore Plc and Las Vegas Sands Corp. have attracted millions to their gaming centers, while employment growth is boosting spending at malls and restaurants. Singapore’s construction industry may shrink next year and the private home market may ease, the trade ministry said today. In August, the government announced measures to cool the property market, including increasing down payments for second mortgages and imposing a stamp duty on property held for less than three years. To contact the reporter on this story: Shamim Adam in Singapore at sadam2@bloomberg.net To contact the editor responsible for this story: Chris Anstey at canstey@bloomberg.net

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