Abstract
The export-reliant Asian economies have been seriously affected by the current
economic and financial
difficulties. Even though Singapore’s economy
and infrastructure sector more specifically appeared at
first resilient to
the crisis, there are now signs of a slowdown. In BMI’s Singapore
Infrastructure Report
Q2 2009 we have revised our forecasts to reflect the
most recent developments. We forecast that the
construction industry will
register real growth of -7.4% y-o-y in 2009, while negative growth is
expected
to persist to 2010.
This decline can be attributed to the
limited number of new projects in the infrastructure sector. What is
more,
many of the big infrastructure projects in all transport, utilities and
construction sectors, which had
added to the momentum of the previous
years, are now reaching their maturity and are due for
completion.
However, to compensate for the limited private investments, the government is
now
appearing willing to increase its own expenditure in the
infrastructure sector. Such a move, that could
bolster the economy, means
that the risks to our forecasts would be on the upside.
Furthermore, the
sharp fall in the growth rate for the construction industry has significantly
dragged down
Singapore’s overall score in our Infrastructure
Business Environment Ratings. Nevertheless, we still
maintain that
Singapore is an attractive market for investors, with low levels of political
and operational
risks, and with a streamlined and transparent procurement
process.
Our overall view for Singapore is a cautious one. Macroeconomic
conditions will still deteriorate.
Singapore will be significantly
affected by declining trade volumes, as the country’s major trading
partners, such as the US, the EU and China, are experiencing a period of weak
economic growth. At the
same time, it is unlikely that domestic demand
will grow either. Therefore, for 2009 we forecast that real
GDP growth
will contract by 2.8%, while unemployment will rise to 3.3%.
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