Although moribund growth continues to underwhelm in the
Singaporean economy (
EWS
,
quote
), the famed city-state may see a reprieve after recently released
reports indicate that inflation continues to subside.
[caption id="attachment_71823" align="alignright" width="300"
caption="The Singapore skyline"]
[/caption]
According to figures released this week
pertaining to consumer prices from Singapore's Department of
Statistics, inflation in Singapore dropped to 4%. This represents
the lowest level of inflation in the Southeast Asian economy in 20
months.
This piece of data is a welcome relief for the Singaporean
economy; there has been a dearth of good news of late. Economic
growth has lagged, in particular
juxtaposed with the high-flying economy
of neighboring Malaysia (
EWM
,
quote
).
As a result of the global slowdown stemming from the European
debt crisis,
the Singaporean economy has stalled
; unlike its regional peers, Singapore has not benefited from a
substantial increase in domestic spending to make up for the drop
off in export demand from developed countries. GDP growth in the
Singaporean economy has dipped to a mere 1% for FY 2012.
With European problems unlikely to resolve themselves in the
near future thanks to continued bickering and contrasting
worldviews, the Singaporean economy's important export sector will
likely suffer as a result.
It's not all doom and gloom for Singapore. Because the Monetary
Authority has had some success in stifling inflation, the central
bank now has more options at its disposal to stimulate the economy.
With concerns of heightened inflationary pressure having
dissipated, the central bank can now feasibly loosen monetary
policy in an attempt to stimulate the economy without worrying
about catalyzing an inflationary cycle.
And if China (
FXI
,
quote
) is able to get its growth back on track later this year as
predicted, the Singaporean economy will benefit appreciably thanks
to the city-state's economy's substantial exposure to the
Mainland.
If Singapore can re-engineer growth via loosening monetary
policy and Chinese stimulus, as well as navigate the potential
pitfalls of an extended housing market and increasing wealth
disparity, investing in the Singaporean economy after a major
pullback could be a profitable investment.
