The sustained trade slowdown experienced by the Chinese economy in the recent times leaves Singapore in an unguarded position with regard to the current economic flows.
Examining the trade turnovers of twenty-three economies within the Asia-Pacific region, a report published by Mody’s Investors Service on March 20, 2019, attempted to highlight how China’s current economy affected the rest of the continent. In particular, it tried to assess which countries stood to gain and which might lose out greatly owing to the changes in China’s present-day trade and investments
Mody’s Investors Service believes that countries like Singapore which had a primarily trade-driven economy were most vulnerable and likely to be most affected by the current slowdown that is occurring in China.
Singapore acts as a key node within the manufacturing circuit of intermediate merchandise, particularly in the field of electronic equipment. As such economies such as Singapore’s are more likely to get caught in the prevalent tensions that is happening between the two countries, China and United States.
The report published indicated that 2019 will see a big turn of events for economies reliant on the Chinese market trends. Trade-oriented countries like Singapore, Hong Kong, S. Korea, Mongolia, and Vietnam among others were most likely to face a huge fall in their real gross domestic product (GDP). Despite the prediction, the report also suggested hope for the countries who had a slightly stronger economy and hence had the potential to hold out against the current trends of declining external demand for a longer period. These countries may even be able to minimize the damage by using the route of higher public expenditure. The Republic of Korea, Taiwan, and Singapore may, therefore, still be able to take control of the damage to their economies because of the slowdown.
Singapore needs to brace itself for a continued weakening of its exports until the economy of China reaches some form of stability, the country must prepare to face a decline in demands for several of its regular export goods especially as Chin seeks to find itself cheaper alternatives. Singapore will also have to carefully navigate its position as a trading hub for other countries keeping the costs and logistics of shipment and trading in mind. Like the H2 of 2018, the coming months are most likely to be a period of low investment and require Singapore to make several informed cuts and checks in its existing fiscal trends to keep itself afloat as the slowdown looks to worsen for the Chinese superpower.
The report also suggests hope for economies that are engaged in production of products that are alike to what China is producing. Though they are the most vulnerable to the slow trade and are the most directly affected, they are also placed most advantageously in case of the slowdown yields any positive effects of public expenditures. These include the countries of Malaysia, Thailand, Vietnam, Taiwan, Japan, and South Korea, the current trade scenario is most likely to be of a long term nature and this may give several businesses opportunities to relocate production and find means of avoiding heavy duty or diluting the risk.
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