No recession for Singapore this year despite sluggish economy, but 2024 remains uncertain: PM Lee

JAKARTA: Singapore will not see a recession this year despite a sluggish economy, although uncertainty remains for 2024, Prime Minister Lee Hsien Loong said on Thursday (Sep 7).

Mr Lee was giving his take on the outlook for ASEAN economies amid China's downturn, and how this might affect Singapore, while speaking to Singapore media after the Association of Southeast Asian Nations' (ASEAN) Summit in Jakarta.

Comparing the 1 per cent growth forecast for Singapore this year to the expected growth of 4 per cent for ASEAN, Mr Lee said Singapore's growth is a little bit slower "because we are more at a developed economy rate of growth".

Noting that a "good year" for the Republic would be about 2.5 per cent and a "very, very good year" at 3 per cent growth, the prime minister said Singapore's post-COVID economic rebound — when it recorded a gross domestic product (GDP) growth of 7.6 per cent in 2021 — was "transient" and not sustainable.

He added: "So for us, 1 per cent is slow. But it's not a recession. And we'll have to see how things go in Europe, in America and also in China.

"And I think all in, I think there's some sluggishness in the economy, we don't think that we are going to a recession this year. But what happens next year, we're not sure yet."

Mr Lee also spoke about the economy in his National Day Rally speech in August when he said Singapore was expecting positive economic growth this year and would "hopefully" avoid a recession.

In findings released on Wednesday, private sector economists cut their forecast for Singapore’s economic growth this year to 1 per cent, down from an earlier projection in June of 1.4 per cent.

A slowdown in the external growth environment was cited as the top downside risk, on top of inflationary pressures and slowing growth in China.

But there seems to be better news for 2024, with economists projecting GDP to expand by 2.5 per cent that year.

Earlier in August, Singapore slightly cut its economic outlook for 2023 — to come in between 0.5 to 1.5 per cent, narrowing from the previous 0.5 to 2.5 per cent range — after it narrowly averted a recession in the second quarter, with weak global demand roiling its trade-reliant economy.

Singapore's GDP expanded a seasonally-adjusted 0.1 per cent quarter-on-quarter in April to June, after a -0.4 per cent contraction in the first quarter of 2023. An economy enters technical recession when it sees negative growth for two consecutive quarters.

ASEAN ECONOMY A "BRIGHT SPOT"

As for the ASEAN economy, Mr Lee called it a "bright spot" amid a gloomy global backdrop, and that he thinks the region's resources - natural gas, oil, minerals - will prop up its economies in the longer term.

"And then you have the traditional services, like tourism, retail, and so on. And that, I think, there could be weakness, depending on the mood. So I wouldn't worry too much about the transients," Mr Lee said.

"I think what you need to do is to enhance our capabilities, and our competitiveness and our cooperation, so that whatever the environment, we can do better for our peoples. And that's what ASEAN is trying to do."

Indonesia's Coordinating Minister for Economic Affairs Airlangga Hartarto said on Monday that the ASEAN region has demonstrated "positive performance" over the past decade, with an average growth rate of 4 per cent to 5 per cent.

Rounding up the summit, Mr Lee said ASEAN has updated its agenda to improve cooperation, which he stressed as crucial in helping the regional bloc maintain its relevance amid mounting geopolitical tensions, instead of remaining passive or avoiding collective positions on issues.

In his remarks at various sessions held during the three-day ASEAN Summit, Mr Lee had cited the Ukraine war, the Myanmar crisis and tensions between the United States and China as developments having an impact on ASEAN.

When asked by Singapore media for examples of how ASEAN can be proactive or even assertive on certain issues, Mr Lee cited how the group has agreed on stepping up cooperation in wide-ranging areas from digital economy, green economy.

"(We) talk about things which are of concern to ASEAN and to the region, and be able to come up with substantive agreement and cooperation projects as well as stances, policies, which will help the countries. That's what ASEAN is about," he added.

"You don't have single spectacular sexy things, but you will have multiple patient positive things. And by accumulating all this patient work, ASEAN makes a difference and has made a big difference to them."

Without ASEAN, Mr Lee said there would not be a forum attended by leaders of US, Japan, China, India, Australia, South Korea, New Zealand and Russia, referring to the East Asia Forum held on Thursday.

"People from all over the world come and they meet us and they won't do that to come to Singapore. They won't even necessarily do that to come to bigger members of ASEAN. But because there is ASEAN every year, we have this forum, and it's very valuable to us," he said.

"And when we speak internationally, and ASEAN can make a statement. It carries some weight because you're talking about a substantial population. And you're talking about a substantial amount of GDP. So, it is valuable to us."

SOUTH CHINA SEA

On tensions in the South China Sea, Mr Lee said he does not expect negotiations on a planned code of conduct to be completed "very, very soon".

China claims most of the South China Sea amid protests from other claimant states - some of which are ASEAN members - and it is hoped that a code of conduct could help resolve disputes in the strategic waterway. But negotiations on the code have stalled multiple times.

Mr Lee called the negotiations a "difficult task", pointing to questions like whether the code will be binding, what areas it will cover, and how it will be enforced.

"We've made some progress, but it will take some time. But nevertheless, it's better that we are talking about this positive agenda on the South China Sea," he said.

"So that even if there are incidents which happen, or untoward developments, you've got something positive which we are working on and which can be the basis for the participants, or whoever bumps into whoever else, to talk to each other and to work things out."

MYANMAR CRISIS

As for the Myanmar crisis, Mr Lee said the newly-agreed “troika mechanism” - comprising ASEAN's immediate past, current and incoming chairs to tackle the crisis in the junta-run state - will ensure leadership continuity and make engagement with stakeholders "more effective".

He also highlighted that the Philippines' replacement of Myanmar as the ASEAN chair in 2026 settles the question of chairmanship, as Myanmar "may or may not" be in a position to be chair that year given the ongoing crisis.

But Mr Lee cautioned that these moves, while useful, will not solve the situation in Myanmar immediately.

"As for how it will be able to cause the violence to stop, to cause solutions to be worked out, to cause humanitarian aid to flow better - those are consequential results, which we hope with better engagement in new course, that will come about," he said.

"But I think it will take time."