|2001 was characterised by challenges stemming from the uncertainty in and the rapid deterioration of the external economic landscape. The sharp slowdown in the US economy, coupled with the global electronics slump, precipitated a synchronised downturn across most countries last year. (See Chart 20a.) The fall in external demand hit Singapores export-oriented manufacturing sector, which then filtered into the other services sectors in the domestic economy. The result was one of the worst economic downturns on record, with the Singapore economy contracting by 2.0% in 2001, following positive growth of 10.3% the year before. (See Chart 20b.) (Refer to Charts Annex for a series of charts on the Singapore economy.) The heightened uncertainty that followed the September 11 attacks also triggered bouts of volatility in international financial markets.
While the adverse shock experienced by the domestic economy was largely cyclical in nature, 2001 also presented an opportunity to re-examine Singapores economic strategies, policies and constraints. Not only is Singapore facing a changing competitive landscape in Asia, rapid technological advances and fundamental shifts in the nature of competition among industries pose both opportunities and challenges for the economy. These changes have highlighted the need for Singapore to fundamentally review its economic strategy to facilitate the restructuring of the economy and prepare itself for its next phase of development.