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Singapore Outlook Seen Improving

January 7, 1999

SINGAPORE (AP) _ Aggressive pro-growth policies, as well as signs of economic recovery in the region, have brightened Singapore’s prospects to recover in the second half of this year and grow 3.5 percent in 2000, a report by Merrill Lynch says.

The report, obtained by Dow Jones Newswires on Thursday, predicts that Singapore interest rates are likely to ``head for historic lows,″ which along with cost-cutting policies should speed recovery.

Merrill Lynch predicts that if U.S. consumers don’t disappoint _ and Christmas sales appeared strong _ then the manufacturing recession Singapore is experiencing ``should prove shallow″ with economic growth returning by the second half of 1999.

Singapore is going through its first recession since the mid-1980s, with the economy shrinking in the second half of 1998. Despite the contraction in the last six months of the year, the government said the economy still grew 1.3 percent for all of 1998.

Merrill’s report forecast the economy will contract 0.9 percent this year but then grow 3.5 percent in 2000.

As one reason for optimism, the report said there are ``no signs of troubles″ in the manufacturing sector’s inventory position.

Previous manufacturing recessions in Singapore in 1985, 1992 and 1996 were characterized by ``severe inventory overhang in electronics,″ it said. ``This time around, however, lead indicators showed no such imbalances in inventory, orders or shipments.″

Merrill Lynch said Malaysia’s ``economic setback″ would weigh on Singapore’s growth in the short-term.

Most of Singapore’s exports go to Indonesia and Malaysia, which have been most affected by the crisis.

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