March 2, 2003	Sunday	Zul Hijjah 28, 1423

SINGAPORE, March 1: Singapore’s economy is expected to grow at least 2.0 per cent this year despite fears of war in Iraq, but unemployment is expected to mount as companies downsize, officials and economists said.

The average unemployment rate climbed to 4.4 percent last year from 3.3 per cent in 2001 and could exceed 5.5 per cent in 2003 if the external and local business environments deteriorate, they said.

It is unlikely the unemployment situation this year is going to see a significant improvement, said Ho Meng Kit, deputy secretary at the Ministry of Trade and Industry (MTI).

Tan Leng Leng, director for research and statistics from the manpower ministry, said unemployment could exceed 5.5 per cent this year if the economy worsens.

Provided the economy recovers, unemployment should ease to about four per cent but we (cannot) rule out unemployment exceeding 5.5 (per cent) given the downside risks, she said.

The island’s unemployment rate hit an all-time high of nearly six per cent during the mid-80s recession.

Despite lingering worries about the spillover effect from a possible war in Iraq, the MTI said it was holding on to its projection of 2.0-5.0 per cent gross domestic product (GDP) growth for 2003, but added the island faced a mixed outlook because of weakness in major world economies.

It reaffirmed earlier estimates that the economy grew 2.2 per cent in 2002, but revised the 2001 figure to a contraction of 2.4 per cent, worse than the earlier estimate of minus 2.0 per cent GDP growth.

But the 2002 growth had little impact on the stock market where investors remained nervous over a protracted standoff between Washington and Baghdad as the key Straits Times index fell 1.23 per cent to close at 1,271.25 points.

The 2001 recession was the most severe in the island republic’s history, coming on the heels of a spectacular expansion of almost 10 per cent the year before.

For the final quarter of 2002, the economy grew 0.4 per cent on an annualised quarter-on-quarter basis after declining 6.6 per cent in the third quarter, narrowly averting a technical recession.

The MTI said forward-looking indicators point to a mixed outlook for the Singapore economy in 2003.

The business expectation surveys show that manufacturers expect business conditions to remain lacklustre in the first half of the year, it said.—AFP