"Stagflation"?

SINGAPORE is not facing the dreaded 1970s curse of stagflation, said Senior Minister of State for Trade and Industry S. Iswaran. Stagflation has become a hot issue among economists.

The unholy combination of sluggish growth, high inflation and rising unemployment inflicted huge damage 30 years ago on developed countries, but Mr Iswaran is confident things are different now.

This is because even as inflation is likely to stay high, the economy expanded 4.3 per cent in the first half of this year.

'Our job market remains healthy. In the first quarter of the year, more than 73,000 jobs were created and unemployment remains low,' he said.

While the United States has severe problems in its financial sector and other economies such as Japan and Germany may see further softening, Asia's growth has been fairly robust.

'In Singapore, the strong pipeline of foreign investments and tourism projects...will also provide a certain amount of support to the economy for the rest of this year and beyond.'

But inflation - the other aspect of stagflation - hit 7.5 per cent in May. 'We expect some moderation in the second half...but inflation is not likely to return to previous levels any time soon,' he said.

Article Source Asiaone Business via Straits Times.
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