Private consumption the weak link in Singapore's economic expansion

When you have an economy charging ahead - it grew by 7.7% last year - you would expect cash registers to be ringing non-stop as more people hit the shops. But the reality has left economists and retailers scratching their heads. Domestic private consumption was estimated to have grown by just 2.8% last year - a meagre increase over 2005's 2.5%. "Private consumption has been the weak link in this current economic expansion," said Dr Chua Hak Bin, Citigroup Economist.

It seems the CEOs and bankers, who are snapping up luxury homes and Lamborghinis, are not splurging enough to make up for the average Joes' lack of spending. "The big boom has benefited companies more than workers. The economic benefits are going to those who are well-to-do and who own capital - not the average person," said Dr Chua. And the impending Goods and Services Tax (GST) hike from 5 to 7% at one go - as signalled by Prime Minister Lee Hsien Loong - is likely to dampen mass spending even further.

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