Global economy to slow

The global economy is divided into two halves for this year. Asia ex-Japan accelerating and advanced nations of US, European Union (EU) and Japan slowing.

United Nation (UN) expects the world economy to slow for next year, growing at 3.1 per cent against 3.6 per cent forecast for 2010. If the unemployment situation in the US does not improve, the sovereign debt crisis continues unabated and Japan struggles to contain deflationary pressure, UN does not rule out a double dip recession. All eyes are now focused on these risk areas.

Ministry of Trade and Industry (MTI) forecasts that Singapore economy will slow to between 4.0 per cent to 6.0 per cent in 2011 from 15.0 per cent expected this year. The forecast for next year is still good growth and Singapore companies should perform well barring any external shocks.

The Straits Times Index (STI) grew whopping 64 per cent in 2009. As for this year, the STI rose 8.6 per cent so far. Much of the increase in STI happened in 2009, the year when Singapore economy started to recover from the global financial crisis. As the economy slows in 2011, one finds it hard to suggest that the STI will reach 3,500 points seen in December 2007 before the global financial crisis hit (i.e. 11.0 per cent rise from this year).

There is still uncertainty and STI may go either way by end 2011. No one can predict how it will end. Stay tuned as we begin 2011 in two weeks time. Happy New Year!

Copyright © 2010, limkimtong for Living Investment

The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.

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