According to a statement released by the country's central
banker, the Singaporean economy (
EWS
,
quote
) continues to be adversely affected by European concerns. The
question now is: just how badly will Europe hurt this important
Southeast Asian economy?
[caption id="attachment_57955" align="alignright" width="300"
caption="Singapore may be slowing for now, but could be a good bet
over the long term"]
[/caption]
The Monetary Authority of Singapore said Thursday that a
prolonged slowdown in the euro zone could bring growth in the
Singaporean economy down to 1% for 2012. With
rising housing and transportation costs bringing inflation to the
3-4% levels
, such a rate of growth could have considerable repercussions on
the Singaporean economy.
As the Monetary Authority of Singapore attempts to slow
inflation, growth concerns could be exacerbated going forward. So
it has decided to strengthen reserves, as
noted in its statement this week
: "This is a pre-emptive measure to strengthen the authority's
capital and reserves, in light of a volatile financial market
environment."
However, it's probably not all doom and gloom for the
Singaporean economy in the medium-term. The central bank also sees
China (
FXI
,
quote
) being able to navigate
a soft-landing
. Considering the Singaporean economy depends heavily on China,
this could help boost the economy, even with mounting European
concerns. With a positive jobs situation and solid wage growth,
Singapore is confident this will
underpin private consumption
.
For long-term investors, the Singaporean economy remains a solid
bet. The country's advantageous geography allows it to take
advantage of growth in neighboring countries like Malaysia (
EWM
,
quote
) and Indonesia (
IDX
,
quote
). Its location also makes it a regional transit hub for both
freight and passenger traffic. Recently built casinos have resulted
in a substantial increase in tourism. Although a sizable housing
bubble and increasing wealth inequality are worrisome, for
long-term investors who are able to wait until Europe gets its act
together, the bullish trends in the Singaporean economy outweigh
the potential pitfalls.
