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Commentary: What slowing growth means for the man in the street

OCBC Bank’s Selena Ling answers your frequently asked questions over news on the outlook for the Singapore economy.

SINGAPORE: The big news two weeks ago was that Singapore’s economic growth had slowed to 0.1 per cent in the second quarter of this year – the slowest seen in a decade. 

The main drag was manufacturing, with the electronics and precision engineering sectors especially affected.

I myself was surprised by how weak the growth data was, which was way below what even the most bearish economist was predicting.

For non-economists, let’s cut through the statistics being hurled to and fro.

Here is my take for ordinary folks out there:


I’m with the Ministers who’ve taken to Facebook on this one. The decade-low growth has triggered some concerns that a recession is headed our way, and the possibility is indeed real. But don’t panic – yet.

There may be a potential technical recession, which is a sequential slowdown that stretches into the third quarter.

What it might possibly lead to in a worst-case scenario is a full-blown, year-long decline where annual growth contracts drastically as compared to 2018. But I don’t think we are quite there yet, although everyone does expect a softening this quarter.

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Here’s what you should be worried about: Globally, all the key engines of economic growth are showing signs of misfiring.

Worryingly, China, Japan and South Korea – an important window into indications for the world’s trade outlook – have all reported year-on-year falls in exports.

This could be a reaction to the US-China trade spat. While the two parties have restarted talks, this may continue to drag on.

The US-China trade war has spooked markets worldwide and raised concerns about the global economy. (Photo: AFP/JOE RAEDLE)

READ: Here’s why the US-China trade war won’t cool down anytime soon, a commentary

Domestically, growth momentum in the construction and the services sector have also sharply moderated compared to a quarter ago. The latter suggests that both businesses and consumers are turning more cautious.

The extent of this sobering news means that Singapore, being a small and open economy, is definitely being affected by what goes on externally. The ongoing US-China trade war and China’s growth moderation, for instance, have dented Singapore’s growth prospects.

Here are the silver linings: Globally, interest rates are softening in line with the global growth slowdown, and domestic interest rates are likely to follow. This could mean less pressure for companies and individual borrowers to service their loans.

Also, given the deteriorating growth outlook and softening inflationary prospects, the Monetary Authority of Singapore (MAS) may contemplate adjusting its current monetary policy stance at its October meeting.

One possible option is that it may flatten the slope or the pace at which the trade-weighted Singapore dollar can appreciate. If the Singapore dollar is softer on a trade-weighted basis, then our exports will be priced relatively more competitively, but our imports will also cost more.

In addition, there is ample fiscal firepower to plan for a more expansionary Singapore Budget in 2020, which would help stimulate the Singapore economy.


Not yet. If you’re gainfully employed, don’t feel compelled to immediately cut back on spending on your daily necessities.

People cross a traffic junction in the Orchard Road shopping district in Singapore on May 27, 2017. (File photo: AFP/Roslan Rahman)

Where you’d like to be more cautious is on luxuries, given that we don’t know just how the third and fourth quarter growth will pan out yet.

And let’s not forget that our second quarter figures are also based on estimates premised on how things have been in the first two months of the quarter. The final verdict for that quarter could still be adjusted when the June economic data is released.

Now, there’s a double-edged sword when it comes to the question about spending. Realistically, if everyone cuts down at the same time, it could push us into a recession for real.

READ: Singapore and the dreaded R word - recession, a commentary

My advice is to be careful and to keep an eye out for what’s happening. Quiz yourself on how to recession-proof your job.

The question you must ask is how you can add value to the company you work for and remain on firm ground, which brings me to my next point.


My answer is two-fold. One, look at how employers typically react; two, it depends on what industry you’re in – up to a point.

First, your boss is not likely to say “wow, the GDP growth is so bad, so let’s start firing people now”. Typically, employers take a longer-term view than that.

READ: Singapore trade, disrupted, (not) business as usual, a commentary

(Photo: Unsplash/Ryoji Iwata)

Given the headwinds, companies – especially small and medium-sized enterprises – might be cautious and put the brakes on any new hiring or investment plans. Job-seekers should be prepared for that.

READ: What 2019’s graduating jobseekers need to know – four recession-proof strategies, a commentary

But if you already have a job and are a productive worker, your boss will know that, when things improve, looking for good talent is difficult in a still-tight labour market. That would hamper their growth and profit plans for when growth ramps up.

Ultimately, it may be “harder to rehire than fire” in a knowledge-based economy.

That said, you might want to take stock if you are in manufacturing or any other industries facing challenges – particularly those that are part of the value chain of companies that are increasingly automating production so that fewer workers are needed.

I’ve said in the past that folks in this sector must look at upgrading their skills, and even consider reskilling. 

READ: Amid economic uncertainty, Singapore’s millennials face a disrupted narrative, a commentary

Actually, this is something that anyone should do – whatever industry you are in, and whatever the growth prospects for the economy.

For the long term, you must always seek to future-proof your job – by learning digital skills for instance – to remain relevant.

Selena Ling is Head of Treasury Research and Strategy at OCBC Bank.

Source: CNA/nr(sl)


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