In the Chinese portion of his National Day Rally speech, Prime Minister Lee Hsien Loong noted that the Singapore economy is slowing due to weaker global demand and the US-China trade war. The SIIA held an evening talk on Monday 19 August, the day after the rally, with Dr. Chua Hak Bin, Senior Economist, Maybank Kim Eng and Mr. Manu Bhaskaran, Council Member, SIIA, looking at “Singapore’s Economy in a Turbulent World”. The session was moderated by Associate Professor Simon Tay, Chairman, SIIA. Here’s some highlights from the discussion.
More photos from the event are available on our Facebook page.
Near-Term Outlook
Earlier this month, the Ministry of Trade and Industry (MTI) cut the full-year growth forecast for Singapore to between 0% and 1%, down from the previous forecast of 1.5% to 2.5%. There is a high chance of Singapore facing a technical recession this year, or two straight quarters of quarter-on-quarter contraction, especially if the US-China trade war persists. Unfortunately, the chances of a deal are looking more and more remote. While some sectors in certain ASEAN economies have benefited from the trade war, Singapore has generally not benefited from trade diversion.
Singapore’s manufacturing sector is faring poorly, with the pinch also hitting trade-related services and sectors such as air cargo. However, at the moment the current downturn is not as bad as in 2008, during the global financial crisis.
Long-Term Challenges
While the current economic headwinds that Singapore is facing are due to trade and the US-China tensions, much of PM Lee’s rally speech was forward looking, addressing education, skills, and the retirement age – as well as the issue of climate change. Singapore stands to be a disproportionate loser from climate change compared to other countries, for instance due to rising sea levels. But there are other global trends that Singapore must watch, including the uncertain international order as US President Donald Trump challenges institutions such as the WTO, and the protectionist sentiment taking root in many economies.
It is crucial for Singapore to adapt to meet these long-term challenges. In some areas Singapore has already done well, such as embracing digital disruption and adopting fintech. But there are other long-standing problems that Singapore has yet to address, such as the issue of retirement adequacy, rising housing prices, birth rates, and productivity numbers. Additionally, while Singapore has tried to encourage entrepreneurship and innovation, it is not clear that this push is resulting in actual tangible outcomes. If Singapore is to remain successful and stable in the years ahead, there will be a need for bold policymaking in the days ahead, and both top-down and bottom-up action in Singapore.
