SINGAPORE: Singapore must brace for greater economic headwinds in the year ahead, as global uncertainties can be expected to persist given how the conflict between United States and China will take time to resolve, said Trade and Industry Minister Chan Chun Sing on Wednesday (Jun 26).
Speaking at the National Center for APEC Executive Forum, Mr Chan also acknowledged the anxiety among workers and businesses about the economy, but said Singapore’s strong fundamentals and economic strategies will enable it to tackle the challenges ahead.
These challenges include the prospect of weaker world growth – as indicated by the progressive downgrades in the International Monetary Fund’s 2019 growth forecast, which currently stands at 3.3 per cent – and a slowdown in global trade this year.
There also remains several uncertainties and downside risks. For one, the US-China trade conflict sees the possibility of a further escalation, after the US threatened to impose tariffs on remaining imports from China and as China hardened its stance.
“Should this happen, there would be further disruptions … and a reorganisation of the supply chains,” said Mr Chan.
There is also the possibility of a sharper-than-expected slowdown in China’s economy, which could in turn be precipitated by the imposition of further US tariffs.
Other downside risks include Brexit-related uncertainties in the United Kingdom and European Union, as well as a World Trade Organization (WTO) system that is “under stress”, said the minister.
“While we all hope that the US and China can resolve their differences amicably, the ongoing tensions are a manifestation of fundamental political and economic differences between the two countries which will take time to resolve,” he said.
As such, global economic uncertainties and the resulting drag on growth can be expected to persist.
“Against this backdrop, we should also brace ourselves for greater economic headwinds in the year ahead,” said Mr Chan, noting that Singapore, being a small and open economy, is not immune to these global developments.
Already, the local economy grew at a slower pace of 1.2 per cent year-on-year for the first three months of 2019, when both the manufacturing and wholesale and retail trade sectors contracted.
Recent economic data, including a double-digit decline in non-oil domestic exports for the third straight month, also suggested that Singapore’s outward-oriented sectors will likely remain weak.
Mr Chan said he understands there is “much anxiety” about the state of the local economy.
“Workers are understandably worried about what slower growth means for their jobs both in the short term and in the long term; while businesses are concerned about the impact on their profitability and operations and on a longer term, how do they organise their production chains and penetrate new markets,” he said.
“All these concerns are reasonable and within expectations.”
But while Singaporeans should stay alert, they should not be afraid as the country can bank on its “strong fundamentals and economic strategies” to distinguish itself and capture new opportunities.
First, Singapore remains a “safe harbour” for companies looking to invest in the region, and is seen as a hub for talent, intellectual property protection, innovation and research and development.
“We maintain a principled stance on issues even in an increasingly polarising environment due to the ongoing trade tensions and we continue to stand for free trade," he said.
"This, combined with our skilled workforce, progressive regulations and pro-business environment have contributed to strong fundamentals of Singapore.”
Second, Singapore continues to work with like-minded partners to uphold and update a rules-based international trading system.
These include being involved in ongoing discussions to reform the WTO, as well as deepening international connections through various agreements, such as the Regional Comprehensive Economic Partnership, and collaborations with countries on the digital economy.
Lastly, Mr Chan said Singapore is looking to ensure its workforce can adapt and take advantage of new opportunities, such as those that may arise from digitalisation and the use of new technologies like artificial intelligence.
In particular, with the digital economy holding “tremendous” potential as the next frontier for the country’s economy, he said Singaporeans “must be ready”.
BUSINESSES NEED TO CHIP IN
Businesses also have a role to play, Mr Chan told participants at the forum which included business leaders, policymakers and academia across Asia Pacific.
Apart from investing in training for its workers, companies must broaden their horizons and venture into emerging markets.
Business leaders also play key roles in shaping their respective governments’ stance towards greater digital integration and the upholding of a global rules-based trading system, stressed Mr Chan.
“It is frank to say that not all governments have an equal and clear understanding of the digital economy,” he said.
“Some still look at the digital economy from the lenses of the conventional economy … where consumption of data is seen as subtractive and therefore, they impose the wrong concept on the flow of data.”
Instead, the free flow of data across borders can have “additive” effects that may lead to the creation of new products and services, said Mr Chan.
“The more we allow the world to be integrated through data and the digital space, the greater the opportunities for the global economy in the next lap.”