Singapore's economy will recover this year as exports of semiconductors and other electronics rise, helped by growing demand and a "more conducive" exchange-rate policy, the central bank said.
Gross domestic product will grow between 3 percent and 4 percent this year, the Monetary Authority of Singapore said in a twice-yearly review of the economy. That repeats a forecast made last week by the Ministry of Trade and Industry.
"Crucial to the continued strength of recovery would be a further pickup in ... global electronics demand," the central bank said.
An expansion in the US$84 billion economy, after last year's worst recession in 38 years, will help curb rising unemployment, which rose to a three-year high of 4.5 percent in March. The seasonally adjusted jobless rate may peak at 5.5 percent in the third quarter, the Monetary Authority of Singapore said.
Companies such as a subsidiary of Matsushita Electric Industrial Co and semiconductor maker Hitachi Ltd have cut jobs on the island of 4 million since exports started slumping a year ago. Singapore's economy shrank 2 percent last year, putting it among the worst performers in Asia.
Last week, the monetary authority said it would maintain its year-old policy of keeping the Singapore dollar stable, or "neutral," against a basket of the currencies of the island's biggest trading partners and competitors. That was a change from the previous policy of "modest" appreciation.
"The current neutral exchange rate policy should continue to support exports in the quarter ahead," the bank said yesterday.
The Singapore dollar has gained 6.3 percent against the dollar this year. That gain has been offset by a 6 percent decline in the Singapore dollar against the yen and a 6.1 percent decline against the euro. It was recently at S$1.7372 to the dollar.
The government's plan to reduce corporate and personal tax rates by about a fifth over three years starting in 2002 will add to economic growth, the central bank said.
As factories invest more to take advantage of the reduction in the tax rate, the second-lowest in Asia, gross domestic product will rise by an extra 0.2 percent in 2003 and as much as 1.2 percent between 2004 and 2007, the bank said.
GDP expanded at an annual pace of 10.3 percent in the second quarter from the first quarter, the Ministry of Trade and Industry said.
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