SINGAPORE: Economic restructuring remains a work-in-progress in Singapore and more must be done to raise productivity growth, the Monetary Authority of Singapore’s (MAS) managing director Ravi Menon said on Monday (Jan 16).
Speaking at the UBS Wealth Insights Conference, he said Singapore is not immune to the global tightening of financial conditions, volatility in capital flows and potential stresses in the regional corporate sector.
“But our macro fundamentals are sound and we will weather these storms. And as we continue to invest in the future - in skills, in technology and in infrastructure - we will emerge a stronger and more dynamic economy,” he said.
MODEST PACE OF EXPANSION
Mr Menon also said the Singapore economy is expected to continue its modest pace of expansion this year, with GDP growth likely to come in the 1 to 3 per cent range.
"Our trade-oriented industries groups benefit from the mild upturn in global and regional electronics. In fact, the strong showing in the last quarter of 2016 indicates that the Singapore economy retains the capacity to ride on cyclical upswing in demand for our exports," he said.
Mr Menon added that he expects the rise of fiscal policy in the United States and other major advanced economies to be a key driving force of the global economy, along with monetary divergence and tightening financial conditions.
Other challenges he listed include balancing growth and stability in China and in Asia’s emerging markets, as well as a pushback against globalisation that can undermine growth prospects.
Mr Kelvin Tay, UBS' regional chief investment officer for Southern APAC, said the Singapore economy has "more or less bottomed out", but that does not mean that it is back to a strong growth phase. "We do expect the Singapore economy to come in this year at around 1.5 per cent - not far from last year's estimate of 1.8 per cent.
"I think in terms of manufacturing, in terms of electronics manufacturing, we clearly have bottomed out, but again on the horizon we do not see very strong growth over the next three to six months."
A bright spot could come from stronger economic numbers from the United States - a key trading partner for export-oriented countries in Asia, he said.
"A strong, resurging US economy will definitely be beneficial to Singapore's economy," said Mr Tay. "Then global demand for manufacturing exports will actually take up. Do we think that's sustainable on a medium- to longer-term basis? I would think it's more long-term than medium-term.
"At the same time, the Chinese economy is slowing down to 6.5 per cent; and also the European economy is probably growing at about 1.5 per cent to 1.8 per cent this year. So if we get all these thing in place, Singapore could actually surprise on the upside towards the end of the year."