The average prime lending rate remained at 5.8 percent throughout 1999, down from the high of 7.79 percent in the preceding year. As a city-state economy dependent on external demand for growth, Singapore's economic prospects in 2000 look secure based on the improving outlook for the external economic environment. Growth in the U.S. and European economies is projected to remain healthy, and should sustain the demand for electronics. Domestically, interest rates are projected to rise only marginally, thereby facilitating investment in production capacity by local firms. More investment from foreign multinational firms is also expected as regional and global demand picks up after a two-year lull.
Consumer sentiments are also more positive with improving job market prospects.
Notwithstanding the many positive factors in Singapore's favor, however, its economy is still vulnerable to some remote but real external risks. Additionally, Singapore's relatively high land and labor costs pose a big challenge to firms' product price competitiveness in global markets. Private sector analysts have optimistically predicted growth generally exceeding 6 percent for Singapore in year 2000. However, the Singapore government, known for its more prudent position, has announced a more conservative 4.5 to 6.5 percent growth forecast for year 2000.