As a result of keen competition for loan customers, excessive optimism and problems in distinguishing between sound and unsound projects, risk may be underestimated during upturns. The labour market has few available resources. Registered unemployment has remained steady at about 2½ per cent since the beginning of 1998. Long-term unemployment is low, and spells of unemployment are generally brief. Unemployment has edged up in the last few months, primarily in Eastern Norway, while employment growth has been limited. In the aftermath of the terrorist attack on 11 September last year, the aviation and travel industries reported job cuts. Cutbacks have also been announced in the process industry. The guidelines for fiscal policy will stimulate activity because petroleum revenues will now be phased into the economy. According to the Government’s estimate, the guidelines imply an average increase in the use of petroleum revenues in the central government budget of about 0.4 per cent of mainland GDP each year from 2002 to 2010. The government budget that was approved for 2002 implies that the use of petroleum revenues will increase by 0.6 per cent of mainland GDP from 2001 to 2002. The guidelines for fiscal policy imply a substantial stimulus each year. The expansionary impetus varies considerably, and is greatest in the first few years. However, an unpredictable and more expansionary fiscal policy than that implied by the guidelines would have resulted in greater uncertainty. The guidelines provide a stable framework that contributes to reducing some of the uncertainty.

However, the announcement in the past week by a few jurisdictions in our region of blanket government guarantees on all bank deposits could potentially have a more direct impact on Singapore. Last Thursday the Singapore Government announced a guarantee on deposits of individuals and non-bank customers with banks, finance companies and merchant banks in Singapore until 31 December 2010. We have decided that such a guarantee is necessary for the following reasons. First, the guarantee ensures a level international playing field for banks in Singapore. The recent announcements in the region of blanket government guarantees on deposits set off a dynamic that puts pressure on other jurisdictions to respond or else risk disadvantaging and potentially weakening their own financial institutions and financial sectors. If Singapore had not introduced a similar guarantee, there was a real risk that depositors would have shifted some of their deposits out of Singapore banks, to banks in other jurisdictions which guarantee deposits. This would have weakened financial institutions here. The Government has therefore taken a precautionary step to pre-empt and avert any such possibility. Second, the guarantee bolsters the confidence that the public has in Singapore’s financial system. It provides certainty to Singaporeans during such challenging and uncertain times in the international environment, notwithstanding that in Singapore our institutions are fundamentally sound. Third, financial services are an important pillar of Singapore’s economy, accounting for 12% of GDP and 5% of Singapore's employment.