This is a news report from the Straits times. I thought it makes itneresting reading and so I am posting it in toto here."Anyone reading about the outlook for Singapore's economy this year would be forgiven for thinking that growth hinges on the integrated resorts (IR).
The buzz surrounding Marina Bay Sands and Resorts World Sentosa has intensified recently, as the resorts gear up for their big openings while Singapore readies itself for a robust 2010 recovery.
Some analysts say the timing couldn't be better. Economists predict the resorts will help power growth to up to 6.5 per cent this year, after a contraction of 2.1 per cent last year.
One of the immediate economic perks of the resort openings is that visitor arrivals could increase by a strong 20 per cent this year, according to estimates by DMG & Partners analyst.
The resorts are also expected to spur domestic spending and further hiring.
But the real story of the economic recovery this year goes beyond the opening of the IRs. After all, tourism makes up only 3 per cent to 4 per cent of Singapore's economy.
And like almost every other major industry in Singapore, the tourist-dependent resorts are still gambling on a turnaround in the global economy.
“The fundamental driver of growth this year is still the global demand cycle, and the resorts are just the bonus on top of that,” said a Citigroup economist.
He is one of at least three economists predicting 6.5 per cent growth this year, well above the official forecast of 3 per cent to 5 per cent. This is based not just on the expected boost from the integrated resorts, but on a rebound in the wider services sector, which remains key to growth.
In the recent downturn, services proved more resilient than manufacturing, the other main growth driver. Estimates released on Monday showed that the economy hit a speed bump in the fourth quarter, largely due to a pullback in manufacturing, especially in the unpredictable biomedical segment.
Services was steadier, continuing to rise quarter-on-quarter in the fourth quarter, and increasing year-on-year for the first time in five quarters.
Economists believe 2010 will be the year of services growth, in line with what the Monetary Authority of Singapore has said about focusing more on services in the future. The resorts will simply be the most visible service sector star.
Trade-related services, which make up about a quarter of the economy, are expected to pick up along with a rebound in global trade, said one of the economist.
Financial services, about 12 per cent of the economy, should also continue to rally as stock markets improve and private and commercial banking strengthen.
“Services growth will be the key employment driver this year, given the opening of the two integrated resorts and the brighter financial services prospects,” said an OCBC economist.
Manufacturing will also boost the recovery, with two new biologics factories coming on-stream in the first quarter. The Purchasing Managers Index, a forward-looking indicator of factory output, rose encouragingly in December.
Of course, there are risks to this bright outlook, one of which is, ironically, the integrated resorts.
Some economists fear the resorts will simply exacerbate the existing volatility of Singapore's economy, reliant as they are on external demand and sentiment.
Despite numerous attempts at diversification, Singapore's export-dependent economy plunged steeply during the downturn last year, and price stability has proved a pipe dream in recent years as property values and inflation lurched from one wild swing to another.
This has prompted some economic soul-searching, most visibly manifested in the setting up of the Economic Strategies Committee. It will this month unveil its suggestions for new ways for Singapore to grow in the next five to 10 years.
A UOB economist is cautious about how much of an economic boost to expect from the resorts this year, given the opening delays — Marina Bay Sands, initially scheduled to open by the end of last year, is now looking at an April opening for its first phase — and the fact that they are an “untested concept”.
“If anything, the impact will be more material in the second half of 2010, assuming no major external shocks,” she said. “We will have to wait and see.”
Adding to the uncertainty is the lack of knowledge about how much the resorts will actually contribute, directly or indirectly, to economic growth.
Some analysts have put it at as little as 0.3 per cent to 0.5 per cent of gross domestic product (GDP). Others, such as CLSA gaming analyst Aaron Fischer, expect a 4 percentage point contribution this year from all resorts-related activity, from tourism to employment and higher consumption.
The reason, Fischer says, is simple: Asians like to gamble — the average bet in Macau is US$62 (RM210), compared to US$10 in Las Vegas. He expects the integrated resorts “to prove extremely successful”. Gaming revenue for this year is expected to hit US$2.9 billion and surge by 45 per cent to US$4.4 billion next year, as the impact of a full year of operation kicks in.
Beyond the resorts, there are also other risks this year. Inflation is one, no thanks to a surge in food and property prices and abundant liquidity. Governments also need to cut back on their stimulus packages: not so quickly that the recovery stumbles but not so slowly that asset bubbles have time to build.
In general, though, economists are optimistic about Singapore's prospects this year.
As Asia leads the global rebound, plenty of cash is floating around looking for a place to be spent — not just at the blackjack table, but on bigger investments in a country full of casino buzz.
A lot is riding on the success of these resorts, from the tangible — such as the prices of luxury homes in Marina Bay and Sentosa Cove — to the more abstract, including local consumer sentiment and foreign investor confidence in Singapore's economic gambles.
But the good news is that even if the promised boost from the resorts turns out to be more hype than reality this year, the economy is unlikely to tank.
So while all eyes will be on the glitz and glamour of the resorts, expect the big payout to come when the global economy recovers, lifting Singapore along with it.
I like the tone of this news report. It is definitely more optimistic than most.
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