SINGAPORE: 2016 could be a tricky year for Singapore as it continues to restructure its economy amid weakness in major trading partners like China, said DBS CEO Piyush Gupta, who was speaking at the DBS' Private Banking Outlook for the first half of 2016 on Wednesday (Jan 6).
He said: "Singapore, I think, will be particularly challenged because in addition to the overall macro global outlook, we’re trying to do two things. One, we’re trying to deflate parts of the economy, particularly the housing market, including consumer demand. Secondly, we’re trying to restructure the supply side through the labour crunch, land... This is not an easy transition for us. So I continue to think this is the trickiest and most sensitive time in Singapore’s economic transformation that we’ll see for a long time."
Mr Gupta said China continues to be a key market to watch. The country is Singapore's largest trading partner, and its slowing economy has put investors on edge, with data released on Monday causing a sharp drop in stock markets across the region.
Mr Gupta believes China is on the right path at the broad policy level, but added that investors must be aware of risks such as market volatility and some companies going bust.
He said: "There will be a lot of volatility and the policy response we see from China will often times appear heavy-handed, and you could fall on the wrong side of that. You have to be thoughtful. I think China will be okay from a macroeconomic standpoint but you could fall on the wrong side of some massive market volatility.
“The second big risk in China which I pointed (out) last year and is more apparent this year, is that you will see a lot of corporate default in China. That is part of them squeezing out excess capacity - they’re going to let companies go."