MM Lee Warns Singapore's GDP Could Shrink by 8% This Year

Channel NewsAsia ran this story on 4 March 2009:

MM Lee warns Singapore's GDP could shrink by 8% this year
By Imelda Saad & May Wong

SINGAPORE: Minister Mentor Lee Kuan Yew has warned that Singapore's GDP could contract by 8 per cent during this global downturn, but he is confident that the country will recover faster than other nations.

Singapore has projected that its economy will contract by 2 per cent to 5 per cent this year.

Mr Lee was speaking on Wednesday to business leaders at a dialogue session, organised by news information company Thomson Reuters.

The US, Europe and Japan economies need to recover before the rest can see a pickup, and once that happens, the minister mentor said Singapore will be able to bounce back much faster because three and a quarter times of the country's GDP is in external trade.

He also said that the city-state has its reserves to thank for in surviving this economic crisis and recounted his conversation with the head of the US National Economic Council, Larry Summers.

"I looked at him and said, 'Do you think we're an ordinary country, we're a little island? We built this enormous super structure through sheer work and with our wits, but we must expect in a nature of the free market that there will be such a crash. We never expected it so soon or so drastic," he said.

Mr Lee added that Singapore sets aside half of its earnings every year in good times. "We saved for the rainy day and the rains have come."

He also commented on the recent change in leadership at investment company Temasek Holdings, which saw its CEO and executive director Ho Ching stepping down after six years at the helm.

Ms Ho will be officially replaced by Mr Charles W. Goodyear on October 1, after a seven-month transition period.

Mr Lee, who is also the chairman of the Government of Singapore Investment Corporation (GIC) said there was a cabinet paper explaining why Ms Ho wanted to step down.

"GIC takes a very conservative approach – low risk, low returns. Temasek goes in for higher rewards, higher risk, and they need a very dynamic team to keep nimble to move with the market and move faster than the market.

"Ho Ching has been doing this for many years now and she thinks it's a good time to make a change. I don't think it's got anything to do with the failed investments in banking. This is part of the ups and downs of any investor," Mr Lee added.

During this financial downturn, Mr Lee expects industries like pharmaceuticals to stay resilient.

That prompted the moderator to ask if he was equally bullish about the casinos in Singapore's upcoming integrated resorts, which drew some laughter.

"I like your tie – it's got decks of cards on it, lots of money symbols," the moderator commented.

"Yeah," the minister mentor answered. "This is cheering for our integrated resort. It was given to me by Steve Forbes and I think that will provide for 10,000 jobs, another 10,000 in Genting in Sentosa – that should increase the tourist revenue, conventions and so on."

Mr Lee added that the state of the global economy will become clearer in about nine months when the US economy is able to see the effects of its economic policies.