A Slowdown Very Likely but no Recession Predicted
There is no doubt that the world economy is going through troubling times, and it is impossible for Singapore not to be adversely effected by these events. The government though – in the shape of trade minister Lim Hng Kiang does not expect it to develop into a full blown recession. That said there is every likelihood that things will get worse before they start to improve.
The Current Situation
Over the past few months unemployment on the island has risen, and that, coupled with slower growth projections, has resulted in some analysts claiming the city state is already in a technical recession. This is not the case however, at least if we go by the accepted definition of an economic recession – two consecutive quarters where there is a decline in GDP (gross domestic product).
The causes of this uncertainty and slowdown are numerous and diverse, but top of the list is the continuing slowdown in China; the impact that the Brexit vote had in Europe (and further afield) and low oil prices. In turn these have resulted in weakened global trade and a sluggish demand in investment in advanced economies.
Singapore’s growth has dwindled in recent years, coming down from 4.7 per cent in 2013, to 3.3 and 2.0 per cent in 2014 and 2015 respectively. The first six months of this year were slightly more encouraging, with a 2.1 per cent growth, however the second half of the year is expected to be at the bottom end of the government’s 1 to 2 per cent forecast.
Though Mr Lim said that there is likely to be quarters that show negative growth, he remained bullish regarding Singapore’s ability to stave off another recession. This is mainly down to the considerable investment and measures that have already been put in place.
The Winners and Losers
As always there are sectors and industries that are faring better and worse relative to each other. Those that are currently struggling, and are likely to for the short term at least are those that are by their nature, linked to external factors. These include the finance and insurance sectors, as well as wholesale trade. Manufacturing output has also been hit by slow demand from outside Singapore.
On the other side of the coin, there are areas of the Singapore economy that are performing well. These include tourism and its related sectors, the IT, information & communication industries, education and the health & social services sector.
Tackling the Problems
One measure that has been put in place in an attempt to inject life into the economy is the SME Working Capital Loan Scheme. Introduced as part of the 2016 budget, this is designed to help small companies with their cash flow, as well as giving them opportunities to raise funds for growth.
Another area where the government has stepped in is by deferring the marine sector’s foreign worker levy increases for a year. This is one sector that faces increasingly stern challenges, and it is hoped this will go some way to alleviating them.
These come on top of the continuing efforts to create “a more sustainable growth path driven by productivity and innovation”, and hence one that will be less impacted by external factors.
Regarding the future, Mr Lim said the situation will be monitored closely and new measures can and will be introduced if they are deemed necessary, stating that “”Depending on the nature and severity of the downturn, the Government is prepared to consider introducing a range of contingency measures, which could include broad-based as well as sector-specific measures.”
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