In the light of these developments, the Executive Board decided at its monetary policy meeting on 26 April to leave the repo rate unchanged at 4 per cent. I would like to spend the rest of my time here discussing the conditions for economic growth in the near future – both here in Sweden and abroad. The American economy is a decisive factor There is still great uncertainty over how quickly confidence in the American economy will return and what spread effects this will involve for the rest of the world. The slowdown in the American economy was preceded, as we know, by a long and pronounced economic boom. Great optimism over future growth prospects, based mainly on expectations of gains in efficiency from IT, led to a substantial increase in investment, a strong growth in consumption and rising share prices over several years. The growth in investment and rise in share prices were particularly strong in IT-related sectors. The high level of domestic demand could not be met with American goods and services, but spilled over to create a considerable deficit on the current account over several years. At the same time, there was a strong expansion of credit. Both households and companies have greatly increased their level of indebtedness, while rising asset prices have increased household wealth. This development has been reflected in a considerable deficit in savings.
Qualifying high-growth and high value-added financial activities will enjoy a concessionary tax rate of 5%, while a 10% rate will apply to tax-sensitive but mature activities. We have also enhanced incentives for specific activities, such as fund management, trustee and custodian services, insurance and capital market and treasury activities. We also undertook a fundamental review of the Central Provident Fund (CPF) Scheme, which is our social security and pension fund scheme. We refocused the CPF on its core objective of providing for the basic needs of the majority of Singaporeans, in terms of retirement needs, healthcare expenses and home ownership. We are tightening the use of CPF for buying properties, so as to leave more for retirement needs. We are reducing the coverage for high-income Singaporeans, who should be able to plan and provide for their own retirement. We are lowering contribution rates for older workers, who are most vulnerable to losing their jobs. These measures will make our labour market more flexible, and contribute to our economy’s overall resilience and competitiveness. Second, we want to encourage entrepreneurship in order to develop more local and foreign start-ups and emerging enterprises to complement our strong base of MNCs and established local companies. In this rapidly changing, unpredictable environment, the best way to spot and exploit new opportunities is not by centralised direction, but through the drive and entrepreneurship of our people. According to the 2001 Global Entrepreneurship Monitor Report, Singapore ranked 27th out of 29 countries in terms of entrepreneurial activity. We need to do better.