Asia could feel the impact of turbulence that rocked global markets over the next three to six months but the region's foundations remained strong, Singapore Prime Minister Lee Hsien Loong said.
The region would be affected if the volatility, which saw stock markets around the world plummet from fears of a global credit crunch, starts to dent US consumer confidence, he said late Sunday.
"If consumer confidence weakens in (the) US, then the economies in Asia and Singapore will be affected," he said in his annual National Day Rally speech aired on local television. "Even if it does, the fundamentals in Asia remain strong and so too for Singapore."
US and European stocks staged a strong recovery Friday after the US Fed took markets by surprise by slashing its discount rate, the interest rate charged on loans to commercial banks, by a half-percentage point to 5.75 percent.
Asian stocks also rode on the positive sentiment generated by the cut in discount rate with regional benchmarks sharply higher Monday as investor confidence returned.
The cut was the first time the US central bank had acted outside regular rate-setting meetings since 2001, in the aftermath of the September 11 terror attacks. As a result, Asian stocks were stronger in trading Monday.
Growing fears of a credit crunch, caused by the crisis in risky US subprime home loans, have played havoc on Wall Street with investors unable to determine the full extent of the crisis.
On Singapore, Lee said the city-state can expect to enjoy sustained long-term economic growth of 4.0-6.0 percent for the next five to 10 years if it continued to adapt to the changing external environment.
In a separate statement, the ministry of trade and industry said Monday Singapore stood a strong chance of growing at the higher end of this range. "The external environment over the next five years is expected to be favourable, increasing the likelihood that Singapore's growth potential is realised," the ministry said in a statement.
"Indeed, if external conditions remain favourable, Singapore should be able to achieve a growth rate at the upper end of the four to six percent range over the next five years." For 2007, Singapore's economy is projected to grow seven to eight percent after expanding 7.9 last year.